Answered: Year Cash Revenues Cash Expenses 1…

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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Question

Payback, Accounting Rate of Return, Net Present Value, Internal Rate of
Return
Blaylock Company wants to buy a numerically controlled (NC) machine
to be used in producing specially machined parts for manufacturers of
tractors. The outlay required is $384,000. The NC equipment will last 5
years with no expected salvage value. The expected after-tax cash flows
associated with the project follow:

Required:
Compute the payback period for the NC equipment.
Compute the NC equipment's ARR. Round the percentage to one decimal
place.
Compute the investment's NPV, assuming a required rate of return of
10%.
Compute the investment's IRR.

Year
Cash Revenues
Cash Expenses
1
$510,000
$360,000
2
510,000
360,000
3
510,000
360,000
4
510,000
360,000
510,000
360,000

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