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Calculate the net present value of the equipment

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Reference no: EM133113721

ABC Company is considering purchasing equipment that costs $235,000. The equipment has an estimated useful life of 5 years and no salvage value. B Company believes that the annual cash inflows from using the equipment will be $65,000.

Required:

a) Calculate the net present value of the equipment assuming that B Company's cost of capital is 12%. Is the equipment an acceptable investment?

b) Calculate the net present value of the equipment assuming that B Company's cost of capital is 10%. Is the equipment an acceptable investment?

Reference no: EM133113721

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