Concept explainers
This problem continues the Piedmont Computer Company situation from Chapter 25. Piedmont Computer Company is considering purchasing two different types of servers. Server A will generate net
Server B will generate net cash inflows of $25,000 in year 1, $15,000 in year 2, and $5,000 in year 3. Server B has a $5,000 residual value and an estimated useful life of three years. Server B also costs $45,000. Piedmont Computer Company’s required
Requirements
- 1. Calculate payback, accounting rate of return,
net present value , andinternal rate of return for both server investments. Use Microsoft Excel to calculate NPV and IRR. - 2. Assuming capital rationing applies, which server should Piedmont Computer Company invest in?
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