Bar Breweries is considering an expansion project with an estimated investment of $1,500,000. The equipment will...

 

Transcribed Image Text:

Bar Breweries is considering an expansion project with an estimated investment of $1,500,000. The equipment will be depreciated to zero salvage value on a straight-line basis over 5 years. The expansion will produce incremental operating revenue of $400,000 annually for 5 years. The company's opportunity cost of capital is 12 percent. Ignore taxes. Calculate: (a) payback period, (b) book rate of return, (c) NPV, (d) IRR, and (e) profitability index. Bar Breweries is considering an expansion project with an estimated investment of $1,500,000. The equipment will be depreciated to zero salvage value on a straight-line basis over 5 years. The expansion will produce incremental operating revenue of $400,000 annually for 5 years. The company's opportunity cost of capital is 12 percent. Ignore taxes. Calculate: (a) payback period, (b) book rate of return, (c) NPV, (d) IRR, and (e) profitability index.

Answer rating: 100% (QA)

a Payback Period The payback period is the time it takes for the initial investment to be recovered ... View the full answer