Lake Torrens Minimarket Desires to Buy a New Coding Machine

question 53

Essay

Lake Torrens Minimarket desires to buy a new coding machine to help control inventories.The machine sells for $73 172 and requires working capital of $8000.Its estimated useful life is five years and will have a salvage value of $8000.Recovery of working capital will be $8000 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 14% required rate of return.
b.Compute the internal rate of return.
c.Determine the discounted payback period of the investment.
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