Question
Bryant Company has obtained the following data about a possible planned investment: Cost $270,000 Terminal salvage value in 8 years $10,000 Annual cash oprtating savings
Bryant Company has obtained the following data about a possible planned investment:
Cost $270,000 Terminal salvage value in 8 years $10,000 Annual cash oprtating savings for 8 years: $50,000 Estimated useful life in years: 8 Minimum desired rate of return: 10% Present value of ordinary annuity, 10%, 8 periods: 5.3349 Present value of one, 10%, 8 periods: 0.4665
The company uses straight-line depreciation method. Ignore income taxes.
The cash operating savings of $50,000 do not include depreciation expense.
Required: A) Compute the net present value of the investment. B) Compute the payback period. C) Compute the accounting rate of return using the initial required investment.
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