Evaluate investment proposal using net present value...

Using the net present value method, determine whether the equipment is an acceptable investment.

Jordan Company is considering purchasing new equipment costing $2,400,000. Jordan Estimates that the useful life of the equipment will be five years and that it will have a salvage value of $600,000. The company uses straight-line depreciation. The new equpment is expected to have a net cash inflow (before taxes) of $258,000 annually. Assume that th tax rate is 40% and that management requires a 5 minimum return on 14%. 6 7 Using the net present value method, determine whether the equipment is an acceptable investment. 8