This exercise continues the Lawlor Lawn Service, Inc., situation from Exercise 20-33 of Chapter 20. Lawlor Lawn

Question:

This exercise continues the Lawlor Lawn Service, Inc., situation from Exercise 20-33 of Chapter 20. Lawlor Lawn Service is considering purchasing a mower that will generate cash inflows of $9,000 per year. The mower has a zero residual value and an estimated useful life of three years. The mower costs $20,000. Lawlor’s required rate of return is 12%.
Requirements
1. Calculate payback period, rate of return, , and IRR for the mower investment.
2. Should Lawlor invest in the new mower?

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at...