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Compute the cash payback period

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Reference no: EM131820521

Question - Morgan Company is considering a capital investment of $180,000 in additional productive facilities. The new machinery is expected to have a useful life of 6 years with no salvage value. Depreciation is by the straight-line method. During the life of the investment, annual net income and net annual cash flows are expected to be $20,000 and $50,000 respectively. Morgan has a 15% cost of capital rate which is the required rate of return on the investment.

Instructions - (Round to two decimals.)

Compute the cash payback period and the annual rate of return on the proposed capital expenditure.

Reference no: EM131820521

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