Fargo Corp.is considering the purchase of a new piece of equipment.The equipment costs $50,000 and will have a salvage value of $5,000 after nine years.Using the new piece of equipment will increase Fargo's annual cash flows by $6,000.Fargo has a hurdle rate of 12%.
a.How much is Fargo's annual depreciation on the equipment?
b.What is Fargo's projected annual increase in net income?
c.What is the accounting rate of return for purchasing the new piece of equipment?
d.Based on financial factors,should Fargo purchase the new equipment? Why or why not?

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The Answer of Fargo Corp.is considering the purchase of a new piece of equipment.The equipment costs $50,000 and will have a salvage value of $5,000 after nine years.Using the new piece of equipment will increase Fargo's annual cash flows by $6,000.Fargo has a hurdle rate of 12%.
a.How much is Fargo's annual depreciation on the equipment?
b.What is Fargo's projected annual increase in net income?
c.What is the accounting rate of return for purchasing the new piece of equipment?
d.Based on financial factors,should Fargo purchase the new equipment? Why or why not?