Textbook Problem

Payback, Accounting Rate of Return, Net Present Value, Internal Rate of Return

Blaylock 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 $384,000. The NC equipment will last 5 years with no expected salvage value. The expected after-tax cash flows associated with the project follow:

Required:

Compute the payback period for the NC equipment.

Compute the NC equipment’s ARR. Round the percentage to one decimal place.

Compute the investment’s NPV, assuming a required rate of return of 10%.

Compute the investment’s IRR.