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A corp is considering modernizing its production facility by investing in new equipment and selling the old equipment. The following information has...
$10,600Annual cash operating costs $29,600
Salvage value in 8 years $0
Annual cash operating costs
$36,000
Depreciation is $10,100 per year for the old equipment. The straight-line depreciation method would be used for the new equipment over an eight-year period with salvage value $4,592.
a)Determine the cash payback period (Ignore income taxes). (cash payback period in years)
(I know i am supposed to divide the cost of capital investment by net annual cash flow, but every time i get the amounts wrong)
b)Calculate the anual rate of return
c)Calculate the net present value assuming a 18% rate of return (Ignore income taxes)
On this answer I was unable to calculate the annual cash flows so that i could get to the part where I use the PV table
d)Should the company purchase the new equipment?
