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b Question 20 6 pts Karpets Industries is investing in a new high-speed loom for weaving its rugs and carpets. The new loom will have
b Question 20 6 pts Karpets Industries is investing in a new high-speed loom for weaving its rugs and carpets. The new loom will have a useful life of 7 years and cost $80,000. The loom's residual value is $5,000. Assume that Karpets requires a return of 10% and that the loom will create annual cash savings of $16,250. What is the net present value (NPV) of the new loom? at 10% # of year at 10% PV of an annuity of $1 PV of $1 1 0.9091 0.9091 0.8264 N 2 3 0.7513 1.7355 2.4869 3.1699 3.7908 4 0.683 5 0.6209 0.5645 6 7 0.5132 0.4665 4.3553 4.8684 5.3349 5.759 6.1446 9 0.4241 0.3855 10 -$888.50 O $1,677.50 O $81,677.50 -$79,111.50 Question 22 6 pts Which of the following statement regarding the payback method is incorrect? The payback method is often used as a screening tool for potential investments. The payback period is the amount of time it takes for a capital investment to pay for itself." O When cash flows are equal each year, the payback period is calculated by dividing the initial investment in the project by its annual cash flow. In general, projects with longer payback periods are safer investments than those with shorter payback periods
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