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Bridgeport Company is considering a capital investment of $339,600 in additional equipment. The new equipment is expected to have a useful life of 8 years

Bridgeport Company is considering a capital investment of $339,600 in additional equipment. The new equipment is expected to have a useful life of 8 years with no salvage value. Depreciation is computed by the straight-line method. During the life of the investment, annual net income and cash flows are expected to be $26,000 and $66,000, respectively. Bridgeport requires a 10% return on all new investments.

Present Value of an Annuity of 1

Period

8%

9%

10%

11%

12%

15%

8

5.74664

5.53482

5.33493

5.14612

4.96764

4.48732

Compute each of the following: (For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round cash payback period, profitability index and annual rate of return to 2 decimal places, e.g. 15.25 and other answers to 0 decimal places, e.g. 5,275.)

1.

Cash payback period.

enter a number of years rounded to 2 decimal places

2.

Net present value.

$enter a dollar amount rounded to 0 decimal places

3.

Profitability index.

enter profitability index rounded to 2 decimal places

4.

Internal rate of return.

enter percentages rounded to 0 decimal places

%

5.

Annual rate of return.

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