Question
Lincoln Research, a nonprofit organization, estimates that it can save $ 26,000 a year in cash operating costs for the next 9 years if it
Lincoln Research, a nonprofit organization, estimates that it can save $ 26,000 a year in cash operating costs for the next 9 years if it buys a special-purpose eye-testing machine at a cost of $ 125,000 . No terminal disposal value is expected. Lincoln Research's required rate of return is 14 %. Assume all cash flows occur at year-end except for initial investment amounts. Lincoln Research uses straight-line depreciation.
| 1. | Calculate the following for the special-purpose eye-testing machine: | |
| a. | Net present value (NPV) (Use factors to three decimal places, X.XXX, and use a minus sign or parentheses for a negative net present value. Enter the net present value of the investment rounded to the nearest whole dollar.) | |
| b. | Payback period | |
| c. | Internal rate of return | |
| d. | Accrual accounting rate of return based on net initial investment | |
| e. | Accrual accounting rate of return based on average investment | |
| 2. | What other factors should Lincoln Research sider in deciding whether to purchase the special-purpose eye-testing machine? | |
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