Blaylock Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined
Question:
Blaylock Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of tractors. The outlay required is $384,000. The NC equipment will last 5 years with no expected salvage value. The expected after-tax cash flows associated with the project follow:
Year Cash Revenues Cash Expenses
1.....................$510,000.............................$360,000
2.......................510,000..............................360,000
3.......................510,000..............................360,000
4.......................510,000..............................360,000
5.......................510,000..............................360,000
Required:
1. Compute the payback period for the NC equipment.
2. Compute the NC equipment's ARR. Round the percentage to one decimal place.
3. Compute the investment's NPV, assuming a required rate of return of 10%.
4. Compute the investment's IRR.
Salvage ValueSalvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... Payback Period
Payback period method is a traditional method/ approach of capital budgeting. It is the simple and widely used quantitative method of Investment evaluation. Payback period is typically used to evaluate projects or investments before undergoing them,...
Step by Step Answer:
Managerial Accounting The Cornerstone of Business Decision Making
ISBN: 978-1337115773
7th edition
Authors: Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger