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Carla Vista Inc. wants to purchase a new machine for $40,110, excluding $1,200 of installation costs. The old machine was purchased 5 years ago and
Carla Vista Inc. wants to purchase a new machine for $40,110, excluding $1,200 of installation costs. The old machine was purchased 5 years ago and had an expected economic life of 10 years with no salvage value. The old machine has a book value of $2,000, and Carla Vista Inc. expects to sell it for that amount. The new machine will decrease operating costs by $8,500 each year of its economic life. The straight-line depreciation method will be used for the new machine for a 6 -year period with no salvage value Click here to view the factor table. (a) Determine the cash payback period. (Round cash payback period to 2 decimal places, eg. 10.s3.) years (b) Determine the approximate internal rate of return. (Round answer to 0 decimal places, eg. 13\%. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) (c) Assuming the company has a required rate of return of 7%, determine whether the new machine should be purchased. The investment be accepted
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