Diamond Company is considering purchasing a machine that would cost $756,000 and have a useful life of 8 years. The machine would reduce cash operating costs by $132,632 per year. The machine would have a salvage value of $151,200 at the end of the project. Compute: Net present value Internal rate of return Profitability index Payback period Simple rate of return Should the company purchase the machine? Why or why not?
Diamond Company is considering purchasing a machine that would cost $756,000 and have a useful life of 8 years. The machine would reduce cash operating costs by $132,632 per year. The machine would have a salvage value of $151,200 at the end of the project. Compute: Net present value Internal rate of return Profitability index Payback period Simple rate of return Should the company purchase the machine? Why or why not?
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 18EB: Garnette Corp is considering the purchase of a new machine that will cost $342,000 and provide the...
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Diamond Company is considering purchasing a machine that would cost $756,000 and have a useful life of 8 years. The machine would reduce cash operating costs by $132,632 per year. The machine would have a salvage value of $151,200 at the end of the project.
Compute:
Net present value Internal rate of return - Profitability index
- Payback period
- Simple rate of return
- Should the company purchase the machine? Why or why not?
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VIEWStep 4 3. Computation of profitability Index of diamond company
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VIEWStep 6 4. Computation of Payback period of diamond company
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