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Compute the accounting rate of return

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Reference no: EM133037069

Question - Remington Company is considering the purchase of some equipment.

The initial investment or cost will be $250,000.

The annual savings in cash operating costs are $80,000.

The estimated useful life of the equipment will be 5 years, at which point it will have a $10,000 terminal salvage value.

The company has a minimum desired rate of return of 14%.

Required -

(1) Compute the Payback Period.

(2) Compute the Net Present Value.

(3) Compute the Accounting Rate of Return.

(4) Indicate whether Remington Company should purchase the equipment. Explain why.

Reference no: EM133037069

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