Calculate the payback period-internal rate of return

Assignment Help Financial Management

Reference no: EM131886424

As the owner of a pizza parlor, you are considering whether to buy a fully automated pizza dough preparation machine. Your staff is wildly supportive of the purchase because it would eliminate a tedious part of their work. Your accountant provides you with the following information: The cost, including shipping, for the pizza machine is $25,000.

Cash savings, including labor, raw materials, and tax savings due to depreciation, are $3,500 per year for 10 years. The opportunity cost of capital is 10 percent.

As you arrive at the pizza parlor in the morning, the staff is in a festive mood because the word has leaked out that the new machine will save the shop $35,000 and only cost $25,000.

1. Calculate the payback period, internal rate of return, net present value, and the profitability index of the proposed endeavor.

2. Based on your analysis, should the owner of the pizza parlor buy the pizza dough machine?

Reference no: EM131886424

Questions Cloud

Accounting-cash and financial break-even quantities : Calculate the accounting, cash, and financial break-even quantities.

Welding business and management style : Working capital management. Need for accurate cash flow forecasting. Discuss which would be the top two for a welding business / management style.

Call option on the intuit stock with strike price : You own a call option on the Intuit stock with a strike price of 36. The option will expire in exactly three months’ time.

What is the project payback : What is the project’s payback? What is the project’s NPV? Its IRR? Its MIRR?

Calculate the payback period-internal rate of return : Calculate the payback period, internal rate of return, net present value, and the profitability index of the proposed endeavor

What is the duration of bond : You have discovered that when the required rate of return on bond you own fell by 0.5 percent from 8 percent to 7.5 percent, What is the duration of this bond?

Reasonable good health : Your 60 year old mother is in reasonable good health and has just received her retirement funds of $140,000 from her employer of 40 years.

Project using all three methods with these interest rates : Calculate the MIRR of the project using all three methods with these interest rates.

Amount of deposit : How much money would you have to deposit today in order to have $2,000 in five years if the discount rate is 10 percent per year?

User Account

All Pages