Question
Clyde Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual Increase
Clyde Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual Increase in cash flow of $101,400. The equipment will have an initial cost of $601,400 and have an 8 year life. The equipment has no salvage value. The hurdle rate is 9%. Ignore income taxes (Future Value of $1. Present Value of $1. Future Value Annuity of $1. Present Value Annuity of $1.) (Use appropriate factor from the PV tables.) a. What is the accounting rate of return? (Round your answer to 2 decimal places.) Answer is complete but not entirely correct. Rate of Return 8.72% b. What is the payback period? (Round your answer to 1 decimal place.) Answer is complete and correct. Payback Period 5.9 Years c. What is the net present value? (Do not round intermediate calculations. Negative value should be indicated by a minus sign. Round your answer to nearest whole number.)
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