What is the annual rate of return

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Reference no: EM131884778

Problem

Jordan and Taylor want to purchase a new 60 quart floor mixer for $12,000. This machine would have a 5 year life with a salvage value of $2,000. The new machine would decrease operating costs by $1,000 each year of its economic life. The straight-line depreciation method would be used for the new machine. The cost of capital is 6%.

Before they spend the money, they have asked you to calculate outcomes with capital investment models.

1. What is the payback period?

2. What is the annual rate of return?

3. What is the internal rate of return?

4. What is the net present value?

5. What is the profitability index?

Reference no: EM131884778

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