The Ike Company is considering the purchase of a high-quality paint coating system at a cost of $40 000 that will provide increased net cash flows of $11 000 per year. The machine would be depreciated using the straight-line method and is expected to have a residual value of $1000 after seven years. Ike's minimum acceptable rate of return on investment is 16%.
Required:
(1) Calculate the payback period for the investment.
(2) Calculate the net present value of the investment.

Question

Quizplus · Accepted Answer

The Answer of The Ike Company is considering the purchase of a high-quality paint coating system at a cost of $40 000 that will provide increased net cash flows of $11 000 per year. The machine would be depreciated using the straight-line method and is expected to have a residual value of $1000 after seven years. Ike's minimum acceptable rate of return on investment is 16%.
Required:
(1) Calculate the payback period for the investment.
(2) Calculate the net present value of the investment.

The Ike Company Is Considering the Purchase of a High-Quality