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Moore Company is considering a capital investment of $180,000 in new equipment. The machinery is expected to have a useful life of 8 years with
Moore Company is considering a capital investment of $180,000 in new equipment. The machinery is expected to have a useful life of 8 years with no salvage value. Depreciation is computed by the straight-line method. During the life of the investment, annual net income and cash inflows are expected to be $10,000 and $20,000, respectively. Moore requires either an 8% rate of return, or a payback period of 8 years. Required: Compute the following and for each capital budgeting technique state whether the project should be accepted or rejected based on the results of that method. Show your computations a) annual rate of return b) cash payback period c) net present value d) profitability index e) internal rate of return
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