Interpretation of present value analysis and payback The Goodwrench Garage is considering an investment in a new tune-up computer. The cost of the computer is $48,000. A cost analyst has calculated the discounted present value of the expected cash flows from the computer to be $52,650, based on the firm’s cost of capital of 12%.
Required:
a. What is the expected return on investment of the machine, relative to 12%? Explain your answer.
b. The payback period of the investment in the machine is expected to be 4.25 years. How much weight should this measurement carry in the decision about whether or not to invest in the machine? Explain your answer.
We need at least 10 more requests to produce the solution.
0 / 10 have requested this problem solution
The more requests, the faster the answer.