The Walker Landscaping Company Can Purchase a Piece of Equipment

Essay

The Walker Landscaping Company can purchase a piece of equipment for $3,600. The asset has a two-year life, will produce a cashflow of $600 in the first year and $4200 in the second year. The interest rate is 15%. Calculate the project's discounted payback and Profitability Index assuming steady cashflows. Should the project be taken? If the accounting rate of return was positive, how would this affect your decision?