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Rondello company is considering a capital investment of

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Rondello Company is considering a capital investment of $150,000 in additional productive facilities. The new machinery is expected to have a useful life of 5 years with no salvage value. Depreciation is by the straight-line method. During the life of the investment, annual net income and cash inflows are expected to be $18,000 and $48,000, respectively. Rondello has a 12% cost of capital rate, which is the minimum acceptable rate of return on the investment.
Compute the following:

  • Annual rate of return%
  • Cash payback period on the proposed capital expenditure years
  • Using the discounted cash flow technique, compute the net present value $

Reference no: EM13574976

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