Question
Your company is considering purchasing new equipment that costs $100,000. The equipment is expected to generate the following cash flows: Year 1: $25,000 Year 2:
Your company is considering purchasing new equipment that costs $100,000. The equipment is expected to generate the following cash flows:
- Year 1: $25,000
- Year 2: $35,000
- Year 3: $45,000
- Year 4: $55,000
a. Calculate the internal rate of return (IRR). b. Determine the net present value (NPV) at a discount rate of 8%. c. Calculate the accounting rate of return (ARR) if the equipment's useful life is 4 years and has no salvage value. d. Evaluate the payback period. e. Should the equipment be purchased based on your calculations?
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Introduction To Financial Accounting
Authors: Anne Marie Ward, Andrew Thomas
7th edition
77138449, 978-0077132682, 77132688, 978-0077138448
