Calculate for the special-purpose oven

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Homecare, a not-for-profit organisation that provides meals to the disadvantaged, estimates that it can save $14,000 a year in cash operating costs for the next 7 years if it buys a special-purpose oven at a cost of $65,000. No terminal disposal value is expected. The required rate of return is 6%. Assume all cash flows occur at year-end except for initial investment amounts.

Required:1. Calculate the following for the special-purpose oven: a, net present value. b, payback period. c, Internal rate of return. d, accrual accounting rate of return based on net initial investment (assume straight-line depreciation).

2. What other factors should Homecare consider in deciding whether to purchase the special-purpose oven?

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This whole assignment is divided into three part of capital budget first part is of computation where as second part is on ethical dilama while third part is of business plan

Reference no: EM131216252

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