Equipment is purchased at a cost of $80,000. As a result, annual cash revenues are expected to increase by $45,000; annual cash expenses are expected to increase by $12,000; straight-line depreciation is used; the asset has a seven-year life; the salvage value is $10,000. Assume the company is in a 34% tax bracket.
a) Determine the accounting rate of return? (round to the nearest %)
b) Determine the payback period?
c) Determine the NPV assuming a minimum required rate of return of 8%?