Question
A company is looking into investing in the purchase of a new equipment for $260,000. The equipment is expected to have a 5-year life with
A company is looking into investing in the purchase of a new equipment for $260,000. The equipment is expected to have a 5-year life with no salvage value. Annual net cash flows are expected to be $32,500 and Net Income is expected to be $40,000. The companys required rate of return is 10%.
Using the information above, compute the following:
1. Cash Payback Period (7 pts)
2. Net Present Value (7 pts)
3. Annual Rate of Return (7 pts)
4. The companyA company is looking into investing in the purchase of a new equipment for $260,000. The equipment is expected to have a 5-year life with no salvage value. Annual net cash flows are expected to be $32,500 and Net Income is expected to be $40,000. The companys required rate of return is 10%.
Using the information above, compute the following:
- Cash Payback Period (7 pts)
- Net Present Value (7 pts)
- Annual Rate of Return (7 pts)
- The company accepts investments with Cash Payback period equal to or less than the useful life, Positive NPV, and an Annual Rate of Return greater than 35%. Should the investment be accepted? Yes or No and why? (4 pts)
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