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The Rosio Corporation is considering replacing the old binding equipment with a new one at a cost of $267,000. With the new equipment, the
The Rosio Corporation is considering replacing the old binding equipment with a new one at a cost of $267,000. With the new equipment, the company expects to save $32,000 in maintenance costs per year, all cash savings. These savings in maintenance costs represent both an increase in cash flow and an increase in incremental operating income. The new binding equipment has an estimated useful life of 6 years with no salvage value. The company's required rate of return is 13%. The old binding equipment has no salvage value. Do not enter dollar signs or commas in the input boxes. Use the present value tables found in the textbook appendix. Use the negative sign for negative values. Round all answers to 2 decimal places. a) Assume the company wants to recover their initial investment on the new equipment in six years. Based on the payback method, should Rosio Cranium purchase the new equipment? Cash Payback Period: 8.34 years Should Rosio purchase the new equipment?: No b) If the ARR method is used, should Rosio Cranium purchase the new equipment? ARR: 11.98 % Should Rosio purchase the new equipment?: Yes c) If the NPV technique was used, should Rosio Cranium purchase the new equipment? Round your answer to the nearest whole number. NPV: $ Should Rosio purchase the new equipment?: No
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