Depew Company would like to increase the automation of their production process by purchasing new equipment...
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Depew Company would like to increase the automation of their production process by purchasing new equipment that would cost $700,000. The equipment is expected to have a useful life of 7 years, and it will be sold at the end of 7 years for $30,000. The equipment would require maintenance work at an annual cost of $45,000. The company's required rate of return is 12 percent. Labor and material cost savings are shown in the table below: 2. Year 1: Year 2: Year 3: Year 4: Year 5: Year 6: Year 7: $150,000 $170,000 $180,000 $200,000 $230,000 $220,000 $170,000 REQUIRED: Construct an Excel spreadsheet to calculate the net present value and internal rate of return in the format like the Computer Application spreadsheet shown in the textbook. Should the company purchase the production equipment? Explain. Depew Company would like to increase the automation of their production process by purchasing new equipment that would cost $700,000. The equipment is expected to have a useful life of 7 years, and it will be sold at the end of 7 years for $30,000. The equipment would require maintenance work at an annual cost of $45,000. The company's required rate of return is 12 percent. Labor and material cost savings are shown in the table below: 2. Year 1: Year 2: Year 3: Year 4: Year 5: Year 6: Year 7: $150,000 $170,000 $180,000 $200,000 $230,000 $220,000 $170,000 REQUIRED: Construct an Excel spreadsheet to calculate the net present value and internal rate of return in the format like the Computer Application spreadsheet shown in the textbook. Should the company purchase the production equipment? Explain.
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The cashflows are in the excel as below Discount Rate 12 Yr 0 1 2 3 4 ... View the full answer
Related Book For
Accounting
ISBN: 978-0324662962
23rd Edition
Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren
Posted Date:
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