This exercise continues the Sherman Lawn Service, Inc., situation from Exercise 19-35 of...

This exercise continues the Sherman Lawn Service, Inc., situation from Exercise 19-35 of Chapter 19. Sherman Lawn Service is considering purchasing a mower that will generate cash inflows of $5,000 per year. The mower has a zero residual value and an estimated useful life of three years. The mower costs $10,000. Sherman’s required rate of return is 10%.

Requirements

1. Calculate payback period, accounting rate of return, and net present value for the mower investment.

2. Should Sherman invest in the new mower?