Carlos Reyes is considering the purchase of equipment for Business Solutions that would allow the company to add a new product to its computer furniture line. The equipment is expected to cost $300,000 and to have a six-year life and no salvage value. The equipment is expected to generate income of $12,939 and net cash flow of $62,939 in each year of its six-year life. Santana requires an 8% return on all investments. Required: 1. Compute the payback period. (Round your final answer to 2 decimal places.) 2. Compute the accounting rate of return. (Round your final answer to 2 decimal places.) 3. Compute the net present value. (Do not round your intermdediate calcluations; Round your final answer to the nearest whole dollar.) Revelant Time Value of Money factors: PV $1 (8%, 6 years): 0.6302 PVA $1 (8%, 6 years): 4.6229 PVAD $1 (8%, 6 years): 4.9927 FV $1 (8%, 6 years): 1.5869 FVA $1 (8%, 6 years): 7.3359 FVAD $1 (8%, 6 years): 7.9228
Carlos Reyes is considering the purchase of equipment for Business Solutions that would allow the company to add a new product to its
computer furniture line. The equipment is expected to cost $300,000 and to have a six-year life and no salvage value. The equipment is
expected to generate income of $12,939 and net
all investments.
Required:
1. Compute the payback period. (Round your final answer to 2 decimal places.)
2. Compute the accounting
3. Compute the
Revelant Time Value of Money factors:
PV $1 (8%, 6 years): 0.6302
PVA $1 (8%, 6 years): 4.6229
PVAD $1 (8%, 6 years): 4.9927
FV $1 (8%, 6 years): 1.5869
FVA $1 (8%, 6 years): 7.3359
FVAD $1 (8%, 6 years): 7.9228
1. 4.77 years
2.
3.
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