Question
Carper was presented with a second capital investment that provided similar production facilities as the first one. This investment cost $450,000, had a useful life
Carper was presented with a second capital investment that provided similar production facilities as the first one. This investment cost $450,000, had a useful life of 7 years with a salvage value of $20,000. 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's 10% cost of capital is also the required rate of return on the investment 1) Compute the cash payback period. 2) Using the discounted cash flow technique, compute the net present value. 3) Based on these calculations, which investment do you recommend? Explain why.
Please don't use excel and provide hand solution!
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