Redman Company Is Considering an Investment in New Machinery

question 17

Essay

Redman Company is considering an investment in new machinery.The details of the investment are as follows:
The company uses straight-line depreciation for its machinery and requires a 12% rate of return.The present value of $1 for 4 years at 12% is 0.636.The present value of an ordinary annuity for $1 for 4 years at 12% is 3.037.
(1)What is the payback period? (Round your answer to one decimal place. )
(2)What is the rate of return on average investment? (Round your percentage to one decimal place. )
(3)What is the net present value?
(4)Would you advise the company to invest in this machinery?

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Definitions:

Node

A point in a plant where leaves, branches, or stems originate.

Trichomes

Hair-like outgrowths on the epidermis of plants, serving various functions such as reducing water loss and providing protection against herbivores.

Herbivores

Organisms that eat primarily plants or plant-based materials.

Water Absorption

The process by which water is taken up by plants from the soil through their roots to maintain hydration and support physiological processes.