Sato Company is considering an investment in equipment that is capable of producing more efficiently than the current technology. The outlay required is $2,200,000. The equipment is expected to last five years and will have no salvage value. The expected cash flows associated with the project are as follows: Year Cash Revenues Cash Expenses 1 $2,940,000 $2,280,000 2 2,940,000 2,280,000 3 2,940,000 2,280,000 4 2,940,000 2,280,000 5 2,940,000 2,280,000 The present value tables provided in Exhibit 19B.1 and Exhibit 19B.2 must be used to solve the following problems. Required: 1. Compute the project's payback period. If required, round your answer to two decimal places. fill in the blank 1 years 2. Compute the project's accounting rate of return. Enter your answer as a whole percentage value (for example, 16% should be entered as "16" in the answer box). fill in the blank 2 % 3. Compute the project's net present value, assuming a required rate of return of 10 percent. When required, round your answer to the nearest dollar. $fill in the blank 3 4. Compute the project's internal rate of return. Enter your answers as whole percentage values. Between fill in the blank 4 % and fill in the blank 5 %
Basic Concepts
Sato Company is considering an investment in equipment that is capable of producing more efficiently than the current technology. The outlay required is $2,200,000. The equipment is expected to last five years and will have no salvage value. The expected cash flows associated with the project are as follows:
| Year | Cash Revenues | Cash Expenses |
| 1 | $2,940,000 | $2,280,000 |
| 2 | 2,940,000 | 2,280,000 |
| 3 | 2,940,000 | 2,280,000 |
| 4 | 2,940,000 | 2,280,000 |
| 5 | 2,940,000 | 2,280,000 |
The
Required:
1. Compute the project's payback period. If required, round your answer to two decimal places.
fill in the blank 1 years
2. Compute the project's accounting
fill in the blank 2 %
3. Compute the project's net present value, assuming a required rate of return of 10 percent. When required, round your answer to the nearest dollar.
$fill in the blank 3
4. Compute the project's
Between fill in the blank 4 % and fill in the blank 5 %
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