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IV. Remington Company is considering the purchase of some equipment. The initial...

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Accounting

IV. Remington Company is considering the purchase of some equipment.

  • The initial investment or cost will be $250,000.

  • The annual savings in cash operating costs are $80,000.

  • The estimated useful life of the equipment will be 5 years, at which point it will have a $10,000 terminal salvage value.

  • The company has a minimum desired rate of return of 14%.

Required: Compute the following: (10 pts.)

(1) The Payback Period.

(2) The Net Present Value.

(3) The Accounting Rate of Return.

(4) Indicate whether Remington Company should purchase the equipment. Explain why.

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