Neighbors Company Is Considering the Purchase of New Equipment That

question 19

Essay

Neighbors Company is considering the purchase of new equipment that will cost $130,000.The equipment will save the company $38,000 per year in cash operating costs.The equipment has an estimated useful life of five years and a zero expected salvage value.The company's cost of capital is 10%.
Required:
1)Ignoring income taxes,compute the net present value and internal rate of return.Round net present value to the nearest dollar and round internal rate of return to the nearest whole percent.
2)Should the equipment be purchased? Why or why not?

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Definitions:

Older Adult

An individual who is in the later stage of life, often defined as being 65 years old or older.

Live Safely

The practice of adopting measures and precautions to prevent harm and ensure a secure and low-risk environment for living.

Domestic Violence

A pattern of abusive behaviors by one partner against another in an intimate relationship such as marriage, dating, or family, encompassing physical, emotional, sexual, and financial abuse.

Witness

A person who sees an event, typically a crime or accident, take place and can provide a first-hand account of it.