Essay
The Ike Company is considering the purchase of a high-quality paint coating system at a cost of $40 000 that will provide increased net cash flows of $11 000 per year. The machine would be depreciated using the straight-line method and is expected to have a residual value of $1000 after seven years. Ike's minimum acceptable rate of return on investment is 16%.
Required:
(1) Calculate the payback period for the investment.
(2) Calculate the net present value of the investment.
Correct Answer:
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(1) $40 000 ÷ $11 000 = 3.64 years
(2) \...View Answer
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Correct Answer:
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(2) \...
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