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Emphasis AaBbcc Heading 1 1 Normal Paragraph Strong Styles Annual Rate of Return ABC is...

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Accounting

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Emphasis AaBbcc Heading 1 1 Normal Paragraph Strong Styles Annual Rate of Return ABC is considering the purchase of equipment for $900,000. Useful life estimated at 6 years (no salvage value). Annual revenues are expected to increase by $400,000 with estimated expenses increasing by $190,000. (excludes Depreciation (S-L)). ABC requires a rate of return of 9%. (cost of capital = 9%) Compute ARR? NPV? Profitability Index (similar projects in the company portfolio have an index of .75)? Payback (3 years)? Would you accept this project

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