Suppose you were considering purchasing a $5000 machine today that would generate additional net profit of $2000 booked at the end of each year. Assuming you need a 15 percent return to justify the investment, would the investment be worth doing if you had only three years of payouts? Would your answer change if you had four years of $2000 payouts? Why or why not?
Suppose you were considering purchasing a $5000 machine today that would generate additional net profit of $2000 booked at the end of each year. Assuming you need a 15 percent return to justify the investment, would the investment be worth doing if you had only three years of payouts? Would your answer change if you had four years of $2000 payouts? Why or why not?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Suppose you were considering purchasing a $5000 machine today that would generate additional net profit of $2000 booked at the end of each year. Assuming you need a 15 percent return to justify the investment, would the investment be worth doing if you had only three years of payouts? Would your answer change if you had four years of $2000 payouts? Why or why not?
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