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Find the arr with annual depreciation

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Acquiring an equipment at 300,000 means selling stock valued at 200,000 that pays dividends of 24,000 annually, and borrowing the 100,000 remaining at 6% rate. The weighted cost of capital that he will use is 10% [(2/3*.12) + (1/3*.06)]. The new equipment will be used for 20 years and will produce a cash inflow of 50,000.

Problem 1: Compute the 1.) PBP, 2.) ARR, with annual depreciation of 14,000, 3.) NPV, and 4.) IRR. 5.) Should the equipment be bought? Explain.

Reference no: EM132713781

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