Bayern-Bauwerk is thinking of buying, at a cost of 220 000, some new packaging equipment that is

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Bayern-Bauwerk is thinking of buying, at a cost of €220 000, some new packaging equipment that is expected to save €50 000 in cash-operating costs per year. Its estimated useful life is 10 years, and it will have zero terminal disposal value. The required rate of return is 16%.

Required

1 Calculate the payback period.

2 Calculate the net present value.

3 Calculate the internal rate of return.

4 Calculate the accounting rate of return based on net initial investment. Assume straight line depreciation.

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at...
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Related Book For  book-img-for-question

Management and Cost Accounting

ISBN: 978-1405888202

4th edition

Authors: Alnoor Bhimani, Charles T. Horngren, Srikant M. Datar, George Foster

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