Book & Bible Bookstore Desires to Buy a New Coding

question 48

Essay

Book & Bible Bookstore desires to buy a new coding machine to help control book inventories. The machine sells for $36,586 and requires working capital of $4,000. Its estimated useful life is five years and will have a salvage value of $4,000. Recovery of working capital will be $4,000 at the end of its useful life. Annual cash savings from the purchase of the machine will be $10,000.
Required:
a.Compute the net present value at a 14% required rate of return.
b.Compute the internal rate of return.
c.Determine the payback period of the investment.

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Definitions:

Payroll

The process of compensating employees for their work, including the calculation of wages and the distribution of payments.

Management Decision Activities

Tasks or processes involved in making strategic choices that affect an organization's goals and operations.

Outsourcing

The business practice of hiring a party outside a company to perform services and create goods that traditionally were performed in-house by the company's own employees and staff.

HR Activities

Functions and tasks carried out by the human resources department, including recruitment, training, performance management, and employee relations.