Initial investment in equipment Annual cash increase in operations: Year 1 Year 2 Year 3 Salvage...
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Initial investment in equipment Annual cash increase in operations: Year 1 Year 2 Year 3 Salvage value Estimated life Required: Proposal A Proposal B Proposal C $90,000 $90,000 $90,000 b. Why? 80,000 10,000 45,000 0 3 yrs 45,000 90,000 45,000 45,000 0 3 yrs The company uses straight-line depreciation for all capital assets. 0 0 0 1 yr a. Compute the payback period, net present value, and accrual accounting rate of return with initial investment, for each proposal. Use a required rate of return of 14%. Rank each proposal 1, 2, and 3 using each method separately. Which proposal is best? Initial investment in equipment Annual cash increase in operations: Year 1 Year 2 Year 3 Salvage value Estimated life Required: Proposal A Proposal B Proposal C $90,000 $90,000 $90,000 b. Why? 80,000 10,000 45,000 0 3 yrs 45,000 90,000 45,000 45,000 0 3 yrs The company uses straight-line depreciation for all capital assets. 0 0 0 1 yr a. Compute the payback period, net present value, and accrual accounting rate of return with initial investment, for each proposal. Use a required rate of return of 14%. Rank each proposal 1, 2, and 3 using each method separately. Which proposal is best?
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This question pertains to investment appraisal via three different methods which are the payback period net present value NPV and accrual accounting rate of return The scenario presented includes thre... View the full answer
Related Book For
Fundamentals of Financial Management
ISBN: 978-0324597707
12th edition
Authors: Eugene F. Brigham, Joel F. Houston
Posted Date:
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