Question
Novak Company is considering a capital investment of $409,460 in additional productive facilities. The new machinery is expected to have a useful life of
Novak Company is considering a capital investment of $409,460 in additional productive facilities. The new machinery is expected to have a useful life of 5 years with no salvage value. Depreciation is computed by the straight-line method. During the life of the investment, annual net income and cash flows are expected to be $38,000 and $118,000, respectively. Novak has a 12% cost of capital rate, which is the minimum acceptable rate of return on the investment, Click here to view PV tables. Compute the annual rate of return. (Round answer to 1 decimal place, e.g. 15.5.) Annual rate of return % Compute the cash payback period on the proposed capital expenditure. (Round answer to 2 decimal places, e.g. 15.25.) ic Cash payback period years
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