Tam company is negotiating for the purchase of equipment

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Tam Company is negotiating for the purchase of equipment that would cost $100,000, with the expectation that $20,000 per year could be saved in cash operating costs. The equipment"s estimated useful life is 10 years, with no salvage value, and would be depreciated by the straight-line method. Tam"s required rate of   return is 12%.

1. The net present value of this investment is:

A) $5,760

B) $6,440

C) $12,200

D) $13,000

2. The payback period of this investment is:

A) 4 years

B) 1 year

C) 10 years

D) 5 years

3. The simple rate of return of this investment is:

A) 8%

B) 20%

C) 12%

D) 10%

Reference no: EM13567226

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