Question
Carper Company is considering a capital investment of $400,000 in additional productive facilities. The new machinery is expected to have useful life of 6 years
Carper Company is considering a capital investment of $400,000 in additional productive facilities. The new machinery is expected to have useful life of 6 years with no salvage value Depreciation is by the straight-line method. During the life of the investment, annual net income and net annual cash flows are expected to be $25,000 and $90,000, respectively. Carper has an 10% cost of capital rate, which is the required rate of return on the investment. (a) Compute the cash payback period. (b) Using the discounted cash flow technique, calculate the NPV.
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