Payback, Accounting Rate of Return, Net Present Value, Internal Rate of Return

Follow the format shown in Exhibit 14B-1 and Exhibit 14B-2 as you complete the requirements below.

Booth Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of tractors. The outlay required is $960,000. The NC equipment will last 5 years with no expected salvage value. The expected after-tax cash flows associated with the project follow:

Year		Cash Revenues		Cash Expenses
1		$1,275,000		$900,000
2		1,275,000		900,000
3		1,275,000		900,000
4		1,275,000		900,000
5		1,275,000		900,000

Required:

1. Compute the payback period for the NC equipment. Round your answer to two decimal places. = 2.56 years

2. Compute the NC equipment's ARR. Round the percentage to one decimal place. %

3. Compute the investment's NPV, assuming a required rate of return of 10%. Round present value calculations and your final answer to the nearest dollar. $

4. Compute the investment's IRR. Between 25% and 30%