1. The directors of XYZ are considering the acquisition of a new equipment installation. The...
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Accounting
1. The directors of XYZ are considering the acquisition of a new equipment installation. The initial cost and setting-up expenses will amount to about $140,000. Its estimated life is about seven years, and estimated annual accounting profit is as follows: Year 1 2 3 4 5 6 7 Cash flow 30,000 50,000 60,000 60,000 30,000 20,000 20,000 Depreciation 20,0004|20,000 20,000 20,000 20,000 20,000 20,000 Profit 10,000 " 30,000 40,000 40,000 10,000 If the required rate of return is 30%: (a) Should the new equipment be installed? (b) List some of the popular errors made in assessing capital projects
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