Question
ABC ONC. is considering a new equipment that has a cost of $122,500. With this new equipment, the company can generate the following cash inflows
ABC ONC. is considering a new equipment that has a cost of $122,500. With this new equipment, the company can generate the following cash inflows during. Mr. Derek, the Chief Executive Officer(CEO), is trying to make a decision based on the payback period. Answer the next four questions using the following information. Year Cash Flow
0 -$122,500 1 $50,000 2 $60,000
3 $25,000 4 $25,000
1. What is the new equipment's traditional payback period?
2. based on the analysis of the traditional payback period in the Q1, do you think Abc should purchase the equipment
3.if the discount rate over the investment period is 10%, what the decision based on the discounted payback period
4. if ABC use NPV, is the ABC will change decision,(use the same discount rat 10%)
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