Question
Terra Networks is planning to buy injection molding machinery costing $180,000. This machinerys expected useful life is 5 years. They require a minimum rate of
Terra Networks is planning to buy injection molding machinery costing $180,000. This machinerys expected useful life is 5 years. They require a minimum rate of return of 8%, and have calculated the following data pertaining to the purchase and operation of this machinery:
| Year | Estimated Annual Cash Inflows | Estimated Annual Cash Outflows | Depreciation |
| 1 | $ 40,000 | $8,000 | $28,000 |
| 2 | $50,000 | $18,000 | $28,000 |
| 3 | $75,000 | $22,000 | $28,000 |
| 4 | $105,000 | $35,000 | $28,000 |
| 5 | $110,000 | $50,000 | $28,000 |
Determine Terra's payback period, accounting rate of return, and NPV for this investment?
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Auditing And Systems Exam Questions And Explanations
Authors: Irvin N. Gleim, William A. Hillison
13th Edition
1581945272, 978-1581945270
