Sunland Inc. wants to purchase a new machine for $31,310, excluding $1,500 of installation costs. The old machine was purchased 5years ago and had an expected economic life of 10 years with no salvage value. The old machine has a book value of $2,300, andSunland Inc. expects to sell it for that amount. The new machine will decrease operating costs by $7,000 each year of its economic life.The straight-line depreciation method will be used for the new machine for a 6-year period with no salvage value.Click here to view PV table.(a)Determine the cash payback period. (Round cash payback period to 2 decimal places, e.g. 10.53.)Cash payback periodyears(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)Assuming the company has a required rate of return of 9%, determine whether the new machine should be purchased.The investment✓ be accepted.

Step 1: Identify the relevant informationCost of New Machine: 31,310 + 1,500 installation cost =…

Answered: Sunland Inc. wants to purchase a new…

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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Which values am I supposed to use for the depreciation?
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