Compute the cash payback period

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1. Compute the cash payback period. Show work and give analysis for the following: Company F is considering purchasing new equipment for $300,000. It is expected that the equipment will produce annual net income of $10,000 over its 10-year useful life. Annual depreciation will be $30,000.

2. Compute the net present value of each project. Show work, give analysis, and detail which project will be most acceptable for the following:

Company D is considering two different, mutually exclusive capital expenditure proposals.

(a) Project A will cost $395,000, has an expected useful life of 10 years, a salvage value of zero, and is expected to increase net annual cash flows by $70,000.

(b) Project B will cost $270,000, has an expected useful life of 10 years, a salvage value of zero, and is expected to increase net annual cash flows by $50,000. A discount rate of 9% is appropriate for both projects.

3. Compute the approximate internal rate of return. Show work and provide written analysis for the following:

DA Company is evaluating the purchase of a rebuilt spot-welding machine to be used in the manufacture of a new product. The machine will cost $170,000, has an estimated useful life of 7 years, a salvage value of zero, and will increase net annual cash flows by $33,740.

Reference no: EM13791372

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