Solution-Calculate the payback period for the proposed

Calculate the payback period for the proposed investment

Assignment Help Financial Management

Reference no: EM132385665

Question

Basic concepts: cash payback period, annual rate of return, net present value, internal rate of return.

Gordon Ltd is considering investing in new factory equipment, at a cost of $360,000. The equipment would have a useful life of six years with no scrap or residual value.

The straight-line method of depreciation will be applied. It is expected that the equipment will generate net annual cash inflows of $80,000 per year. Gordon Ltd has an 8% cost of capital and this is the required rate of return for all proposed investments.

Note: company taxation may be ignored.

Requirements

(a) Calculate the payback period for the proposed investment.

(b) Calculate the annual rate of return for the proposed investment.

(d) Estimate the internal rate of return for the proposed investment.

(e) Is the proposed investment acceptable?

Reference no: EM132385665

Questions Cloud

The applicability of standard costing : The applicability of standard costing in modern manufacturing environments in volatile environments

Calculate the net present value and profitability index : If an investment in new equipment is made, it is expected that this will significantly reduce the risk of injuries to factory employees.

Design your own data architecture : Design a model to store data for application - design your own data architecture and properties for the classes, however it should reflect understanding

MITS4003 Database Systems Assignment Problem : MITS4003 Database Systems Assignment Help and Solution, Assessment Help - Victorian Institute of Technology, Australia

Calculate the payback period for the proposed investment : The straight-line method of depreciation will be applied. It is expected that the equipment will generate net annual cash inflows of $80,000 per year.

How do games make a valuable contribution to children growth : How do games make a valuable contribution to children's growth and development? Provide three examples. Why is it important to modify games for elementary.

Explain the best perspective to define quality of life : Post a 250-word response that explains the best perspective through which to define quality of life in a city. Choose from the following perspectives.

Build a Smart Parking system using IoT : Build a Smart Parking system using IoT to show real-time vacancy of a parking lot at a shopping centre with two entries. Each entry has an exist

Which udl guidelines do you use with students : Which UDL Guidelines/checkpoints do you use (or have seen) with students? Go back and highlight those strategies you have used (or have seen used).

User Account

All Pages

Calculate the payback period for the proposed investment

Reference no: EM132385665

Reference no: EM132385665

Questions Cloud

Reviews

Write a Review

Financial Management Questions & Answers

Treasury bond call option with a strike price

What is your best estimate of the company cost of equity

Differentiate the primacy and recency effects

What are the payments in the last three years

The income usually more or less under non-gaap than gaap

What is the free cash flow for the current year

Compute after-tax cash flows resulting from operating income

Interactions will likely have least effect on dollar value

The us market beta of this british project to be

Balance depreciation exceed straight-line depreciation

Calculate an actuarially fair insurance premium

What is the maximum amount he can borrow

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT