Five years ago,Burton Company purchased equipment with an expected useful life of 5 years.The initial cost of the equipment was $160,000.Burton's cost of capital is 12%; when it purchased the equipment,Burton computed a net present value of $15,824 for the investment.During the current year,the equipment reached the end of its useful life.Burton determined that,over the 5-year life,the equipment had generated annual cash inflows of $46,000.
Required:
Conduct a post-audit to determine whether the equipment achieved the net present value the company had expected.Based on the results actually achieved,was the asset in fact an acceptable investment? (PV of $1 and PVA of $1)(Use appropriate factor(s)from the tables provided.)

Question

Quizplus · Accepted Answer

The Answer of Five years ago,Burton Company purchased equipment with an expected useful life of 5 years.The initial cost of the equipment was $160,000.Burton's cost of capital is 12%; when it purchased the equipment,Burton computed a net present value of $15,824 for the investment.During the current year,the equipment reached the end of its useful life.Burton determined that,over the 5-year life,the equipment had generated annual cash inflows of $46,000.
Required:
Conduct a post-audit to determine whether the equipment achieved the net present value the company had expected.Based on the results actually achieved,was the asset in fact an acceptable investment? (PV of $1 and PVA of $1)(Use appropriate factor(s)from the tables provided.)

Five Years Ago,Burton Company Purchased Equipment with an Expected Useful