Said Company Is Considering the Purchase of a New Piece

question 71

Essay

Said Company is considering the purchase of a new piece of equipment for $45,000. The projected after-tax net income associated with this investment is $3,000 for each of the next three years. The company uses straight-line depreciation. The machine has a useful life of 3 years and no salvage value. Management of the company considers a 12% return on investment to be satisfactory.
Required:
1. What is the discounted payback period (in years) for this investment (rounded to one decimal place)? (The appropriate discount factors for 12% are as follows: Year 1 = 0.893; Year 2 = 0.797; and Year 3 = 0.712.)
2. What is the estimated net present value (NPV) of this proposed investment, rounded to the nearest whole number?

---

Definitions:

Parrot

A type of bird known for its brightly colored feathers and ability to mimic sounds and human speech.

Bus

A large vehicle designed to carry numerous passengers along designated routes, commonly used for public transportation.

Month

A unit of time, used in calendars, that is approximately based on the natural period related to the motion of the Moon; around 30 days.

Computer Course

An educational program designed to teach students about computers, including their operation, software applications, and programming languages.