Roberts Company is considering an investment in equipment that is capable of producing more efficiently than the current technology. The outlay required is $2,400,000. The equipment is expected to last five years and will have no salvage value. The expected cash flows associated with the project are as follows:
Year | Cash Revenues | Cash Expenses |
1 | $2,980,000 | $2,260,000 |
2 | 2,980,000 | 2,260,000 |
3 | 2,980,000 | 2,260,000 |
4 | 2,980,000 | 2,260,000 |
5 | 2,980,000 | 2,260,000 |
The present value tables provided in Exhibit 19B.1 and Exhibit 19B.2 must be used to solve the following problems.
Required:
1. Compute the project’s payback period. If
required, round your answer to two decimal places.
years
2. Compute the project’s accounting rate of
return. Enter your answer as a whole percentage value (for example,
16% should be entered as "16" in the answer box).
%
3. Compute the project’s net present value,
assuming a required rate of return of 10 percent. When required,
round your answer to the nearest dollar.
$
4. Compute the project’s internal rate of return. Enter your answers as whole percentage values.
Between % and %
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Roberts Company is considering an investment in equipment that is capable of producing more efficiently than...
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