Roberts Company is considering an investment in equipment that is capable of producing more efficiently than the
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Question:
Roberts Company is considering an investment in equipment that is capable of producing more efficiently than the current technology. The outlay required is $2,266,667. The equipment is expected to last five years and will have no salvage value. The expected cash flows associated with the project are as follows:
Year | Cash Revenues | Cash Expenses |
1 | $2,990,000 | $2,310,000 |
2 | 2,990,000 | 2,310,000 |
3 | 2,990,000 | 2,310,000 |
4 | 2,990,000 | 2,310,000 |
5 | 2,990,000 | 2,310,000 |
Required:
1. Compute the project's payback period. If required, round your answer to two decimal places.
2. Compute the project's accounting rate of return. Enter your answer as a whole percentage value
3. Compute the project's net present value, assuming a required rate of return of 10 percent. When required, round your answer to the nearest dollar.
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