Question
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. |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started