ow to find ARR
Basic Capital Budgeting Techniques; No Taxes, Uniform Net Cash Inflows; Spreadsheets
Bob Jensen Inc. purchased a $650,000 machine to manufacture specialty taps for electrical equipment.
Jensen expects to sell all it can manufacture in the next 10 years. To encourage capital investments,
the government has exempted taxes on profits from new investments. This legislation is to
be in effect for the foreseeable future. The machine is expected to have a 10-year useful life with no
salvage value. Jensen uses straight-line
each year for 10 years. Jensen uses a 12% discount rate in evaluating capital investments. Assume,
for simplicity, that MACRS depreciation rules do not apply.
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