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3.0 The Rango Company is considering a capital investment for which the initial outlay is $20,000. Net annual cash inflows (before taxes) are predicted
3.0 The Rango Company is considering a capital investment for which the initial outlay is $20,000. Net annual cash inflows (before taxes) are predicted to be $4,000 for 10 years. Straight-line depreciation is to be used, with an estimated salvage value of zero. Ignore income taxes and assume a cost of capital (before tax) of 12 percent. Compute the: (a) Payback period (2 mks) (b) Discounted Payback Period (3 mks) (c) Accounting Rate of Return (ARR) (4 mks) (d) Net Present Value (NPV) (5 mks) (e) Internal Rate of Return (IRR) (6 mks) (Total Marks: 20 marks)
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