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?

Answer rating: 100% (QA)

To answer this question we need to evaluate each proposal using three different investment appraisal techniques the payback period the net present value NPV and the accounting rate of return ARR We ar... View the full answer