PROBLEM 1 Capital budgeting methods, no income taxes. (PLEASE REFER TO TABLE 2 AND TABLE 4 FOR PRESENT VALUE FACTOR) River Company runs hardware stores in a tristate area. River's management estimates that if it invests $250,000 in a new computer system, if can save $65,000 in annual cash operating costs. The system has an expected useful life of 8 years and no terminal disposal value. The required rate of return is 8%. Ignore income tax issues in your answers. Assume all cash flows occur at year end except for initial investment amount at the beginning of the year. (1-1-2019) Required: 1. Calculate the following for the new machine: a. Net present value b. Payback period c. Discounted payback period Discounted Pavhack Period e. Accrual accounting rate of return based on the net initial investment (assume straight-line depreciation) 2. What other factors should Yummy Candy consider in deciding whether to purchase the new machine? Other than the NPV, rate of return and the payback period on the new computer system, factors that River should consider are the following: - Issues related to the financing the project, and the availability of capital to pay for the system. - The effect of the system on employee morale, particularly those displaced by the system. Salesperson expertise and real-time help from experienced employees is key to the success of a hardware store. - The benefits of the new system for customers (faster checkout, fewer errors). - The upheaval of installing a new computer system. Its useful life is estimated to be eight years. This means that River could face this upheaval again in eight years. Also, ensure that the costs of training and other "hidden" start-up costs are included in the estimated $250,000 cost of the new computer system. PROBLEM 1 Capital budgeting methods, no income taxes. (PLEASE REFER TO TABLE 2 AND TABLE 4 FOR PRESENT VALUE FACTOR) River Company runs hardware stores in a tristate area. River's management estimates that if it invests $250,000 in a new computer system, if can save $65,000 in annual cash operating costs. The system has an expected useful life of 8 years and no terminal disposal value. The required rate of return is 8%. Ignore income tax issues in your answers. Assume all cash flows occur at year end except for initial investment amount at the beginning of the year. (1-1-2019) Required: 1. Calculate the following for the new machine: a. Net present value b. Payback period c. Discounted payback period Discounted Pavhack Period e. Accrual accounting rate of return based on the net initial investment (assume straight-line depreciation) 2. What other factors should Yummy Candy consider in deciding whether to purchase the new machine? Other than the NPV, rate of return and the payback period on the new computer system, factors that River should consider are the following: - Issues related to the financing the project, and the availability of capital to pay for the system. - The effect of the system on employee morale, particularly those displaced by the system. Salesperson expertise and real-time help from experienced employees is key to the success of a hardware store. - The benefits of the new system for customers (faster checkout, fewer errors). - The upheaval of installing a new computer system. Its useful life is estimated to be eight years. This means that River could face this upheaval again in eight years. Also, ensure that the costs of training and other "hidden" start-up costs are included in the estimated $250,000 cost of the new computer system