Project A requires a $240,000 investment for new machinery with a four-year life and no salvage value.
Question:
Project A requires a $240,000 investment for new machinery with a four-year life and no salvage value. The project yields the following annual results. Cash flows occur evenly within each year.
Required
1. Compute Project A’s annual net cash flows.
2. Determine Project A’s payback period.
3. Compute Project A’s accounting rate of return.
4. Determine Project A’s net present value using 8% as the discount rate.
Transcribed Image Text:
Annual Amounts Project A Sales of new product... $250,000 Expenses Materials, labor, and overhead (except depreciation)... 115,000 Depreciation-Machinery 60,000 Selling, general, and administrative expenses.. 35,100 Income... $ 39,900
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