BSU Inc. wants to purchase a new machine for $29,300, excluding $1,500 of installation costs. The old machine was bought five yearsago and had an expected economic life of 10 years without salvage value. This old machine now has a book value of $2,000, and BSUInc. expects to sell it for that amount. The new machine would decrease operating costs by $7,000 each year of its economic life. Thestraight-line depreciation method would be used for the new machine, for a six-year period with no salvage value.Click here to view the factor table.(a)Determine the cash payback period. (Round cash payback period to 2 decimal places, e.g. 10.53.)Cash payback period(b)Determine the approximate internal rate of return. (Round answer to O decimal places, e.g. 13%. For calculation purposes, use 5 decimalplaces as displayed in the factor table provided.)Internal rate of return(c)yearsThe investmentAssuming the company has a required rate of return of 10%, determine whether the new machine should be purchased.be accepted.%

It is a tool to estimate the profitability of an investment. It is the discount rate, at which the…

BSU Inc. wants to purchase a new machine for $29,300, excluding $1,500 of installation costs. The old machine was bought five years ago and had an expected economic life of 10 years without salvage value. This old machine now has a book value of $2,000, and BSU Inc. expects to sell it for that amount. The new machine would decrease operating costs by $7,000 each year of its economic life. The straight-line depreciation method would be used for the new machine, for a six-year period with no salvage value.

BSU Inc. wants to purchase a new machine for $29,300, excluding $1,500 of installation costs. The old machine was bought five years ago and had an expected economic life of 10 years without salvage value. This old machine now has a book value of $2,000, and BSU Inc. expects to sell it for that amount. The new machine would decrease operating costs by $7,000 each year of its economic life. The straight-line depreciation method would be used for the new machine, for a six-year period with no salvage value.

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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