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Calculate the payback period of the investment

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Problem - Lynn Co. is considering the investment of $90,000 in a new machine. The machine will generate cash flow of $10,000 per year for each year of its 15 year life and will have a salvage value of $5,000 at the end of its life. Lynn Co.'s cost of capital is 8%.

(a) Calculate the net present value of the proposed investment. Ignore income taxes, and round all answers to the nearest $1.

(b) Calculate the present value ratio of the investment.

(c) What will the internal rate of return on this investment be relative to the cost of capital (higher, lower, or the same)? Explain your answer.

(d) Calculate the payback period of the investment.

Please assist with understanding the correct answers for these questions and how they are calculated.

Reference no: EM131794191

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