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A company is considering purchasing a new second machine in order to expand their business. The...

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Accounting

A company is considering purchasing a new second machine inorder to expand their business. The information for the new machineis:

Cost= $100,000

Increase in contribution margin= $25,000

Life of the machine= 5 years

Required rate of return = 10%

Calculate the following:

a. Net present value(NPV) (Use factors to three decimal places, X.XXX, and usea minus sign or parentheses for a negative net present value. Enterthe net present value of the investment rounded to the nearestwhole dollar)

b. Payback period(Round your answer to two decimal places.)

c. Discounted paybackperiod (Round interim calculations to the nearest wholedollar. Round the rate to two decimal places, X.XX%.)

d. Internal rate ofreturn (Round the rate to two decimal places, X.XX%.)

e. Accrual accounting rate ofreturn based on net initial investment (Round interimcalculations to the nearest whole dollar. Round the rate to twodecimal places, X.XX%.

Answer & Explanation Solved by verified expert
4.1 Ratings (818 Votes)
a NPV is 5250 Period Amount PV Factor PV 1110Period Amount X PV Factor 0 100000 100 100000 1 25000 091 22725 2 25000 083 20650 3 25000 075 18775 4 25000 068 17075 5 25000 062 15525    See Answer
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