Riguel Company is considering a long-term capital investment project in laser equipment. Thiswillrequire an investment of $280,000, and it will have a useful life of 5 years. Annual net income isexpected to be $16,000 a year. Depreciation is computed by the straight-line method with nosalvage value. The company's cost of capital is 10%, and it desires a cash payback of 60% of aproject's useful life or less. (Hint: Assume cash flows can be computed by adding backdepreciation expense.)(Round all computations to two decimal places unless directed otherwise.)a. Compute the cash payback period for the project.b. Compute the net present value for the project. (Round to nearest dollar.)c. Compute the annual rate of return for the project.d. Should the project be accepted? Why or why not?

Given in the question: Investment $280,000 Useful Life 5 Years Annual Net Income…

a. Compute the cash payback period for the project. b. Compute the net present value for the project. (Round to nearest dollar.) c. Compute the annual rate of return for the project. d. Should the project be accepted? Why or why not?

a. Compute the cash payback period for the project. b. Compute the net present value for the project. (Round to nearest dollar.) c. Compute the annual rate of return for the project. d. Should the project be accepted? Why or why not?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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To calculate net present value of a project with normal cash flows, find the present value of the expected cash flows, and subtract A) retained earnings. B) the cost of the investment. C) the factor loading. D) the payback period.
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