A livestock producer is evaluating a $40,000 investment in a new feed storage and blending system. the producer believes that the equipment will add $10,000 per year to the cash flow of the business. The system has a six-year life and a salvage of 4,000.

a. compute the payback period for this investment. explain your results.

b. Ignoring income taxes, compute the NPV. Assume the cost of capital is 10%. Explain your results.

c. Compute the Benefit/Cost Ratio. Explain your results.

Answer rating: 100% (QA)

a The payback period is the length of time it takes for the investment to recover its initial cost T... View the full answer