Yoshika Landscaping is contemplating purchasing a new ditch-digging machine that promises savings of $5,600 per year for

Question:

Yoshika Landscaping is contemplating purchasing a new ditch-digging machine that promises savings of $5,600 per year for 10 years. The machine costs $21,970, and no salvage value is expected.

The company’s cost of capital is 12%. You have been asked to advise Yoshika relative to this capital investment decision. As part of your analysis, compute the following:

1. The payback period

2. The unadjusted rate of return

3. The net present value

4. The internal rate of return

What factors besides your quantitative analysis should be considered in making this decision?

Net Present Value
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Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...