Sam's Structures Desires to Buy a New Crane and Accessories

question 74

Essay

Sam's Structures desires to buy a new crane and accessories to help move and install modular buildings. The machine sells for $75,000 and requires working capital of $10,000. Its estimated useful life is six years and it will have a salvage value of $17,560. Recovery of working capital will be $10,000 at the end of its useful life. Annual cash savings from the purchase of the machine will be $20,000.
Required:
a.Compute the net present value at a 12% required rate of return.
b.Compute the internal rate of return.
c.Determine the payback period of the investment.

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Definitions:

Melanie Klein

A psychoanalyst known for her work in child analysis and development of the object relations theory.

Idealizations

The cognitive process of perceiving others, oneself, or situations in an overly positive way, ignoring potential negative aspects.

Psychosexual Development

Freud's theory on how personality develops during childhood through a series of stages centered on erogenous zones.

Avoiding Relationships

A behavior pattern where an individual actively distances themselves from forming close or intimate relationships with others.