Ben Limited desires to purchase a new trucking equipment. The equipment costs $185,000 and requires working capital
Question:
Ben Limited desires to purchase a new trucking equipment. The equipment costs $185,000 and requires working capital of $25,000. Its estimated useful life is six years, and it will have a salvage value of $12,000. Recovery of working capital will be $12,000 at the end of its useful life. Annual cash savings from the purchase of the equipment will be $30,000. The required rate of return is 12% Compute the net present value and payback period of the investment.
Requirement: Should Ben Limited purchase the new trucking equipment? Why?
Question 2
Fable Castle Corporation has a 20% required rate of return on investment for each of its stationary branch. Operating data for three of its stationary branches for 2020 are as follows:
Management and Cost Accounting
ISBN: 978-1405888202
4th edition
Authors: Alnoor Bhimani, Charles T. Horngren, Srikant M. Datar, George Foster