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

question 75

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 discounted payback period of the investment.
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Definitions:

Organizational Performance

The analysis of a company's performance against its goals and objectives, often measured through financial, social, and environmental metrics.

Limitation

A restriction or boundary that defines the scope of something, potentially constraining actions, abilities, or developments.

Reward System

A set of mechanisms or programs designed to motivate and recognize employees' efforts, achievements, and performance.

Profit-Sharing Programs

Programs in which employees receive a share of the company's profits, typically as a part of their compensation package.