Question
Doug's Custom Construction Company is considering three new projects, each requiring an equipment investment of $22,000. Each project will last for 3 years and produce
Doug's Custom Construction Company is considering three new projects, each requiring an equipment investment of $22,000. Each project will last for 3 years and produce the following net annual cash flows.
| Year | AA | BB | CC | |||
| 1 | $7,000 | $10,000 | $13,000 | |||
| 2 | 9,000 | 10,000 | 12,000 | |||
| 3 | 12,000 | 10,000 | 11,000 | |||
| Total | $28,000 | $30,000 | $36,000 |
The equipment's salvage value is zero, and Doug uses straight-line depreciation. Doug will not accept any project with a cash payback period over 2 years. Doug's required rate of return is 12%
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Managerial Accounting Tools for business decision making
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
6th Edition
978-0470477144, 1118096894, 9781118214657, 470477148, 111821465X, 978-1118096895
