Payback-accounting rate of return-net present value

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Reference no: EM132018119

PAYBACK, ACCOUNTING RATE OF RETURN, NET PRESENT VALUE, INTERNAL RATE OF RETURN

Ripit Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of tractors The outlay required is $480,000. The NC equipment will last five years with no expected salvage value. The expected after-tax cash flows associated with the project follow:

Year Cash Revenues Cash Expenses

1 $780,000 $600,000

2 780,000 600,000

3 780,000 600,000

4 780,000 600,000

5 780,000 600,000

Required:

1. Compute the payback period for the NC equipment.

2. Compute the NC equipment's ARR.

3. Compute the investment's NPV, assuming a required rate of return of 10 percent.

4. Compute the investment's IRR.

Reference no: EM132018119

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