Compute the net present value

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Question - A Company wants to buy a new stamping machine. Details of the proposal were as follows:

Cost $350,000

Net income $39,204

Annual net cash inflows $64,404

Residual value $28,000

Estimated useful life in years 10

The company's minimum rate of return is 16 percent.

Required -

(1) Compute (a) the Net Present Value; (b) the Accounting Rate of Return; (c) the Payback Period.

(2) Summarize the information obtained in (a), (b), and (c) and make your recommendation.

(3) If your answers obtained in the frame of the given three methods will differ, which method is the best for Capital Investment Analysis.

Reference no: EM133106129

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