Book & Bible Bookstore desires to buy a new coding machine to help control book inventories.The machine sells for $36 586 and requires working capital of $4000.Its estimated useful life is five years and will have a salvage value of $4000.Recovery of working capital will be $4000 at the end of its useful life.Annual cash savings from the purchase of the machine will be $10 000.
Required:
a.Compute the net present value at a 14% required rate of return.
b.Compute the internal rate of return.
c.Determine the discounted payback period of the investment.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Question

Quizplus · Accepted Answer

The Answer of Book & Bible Bookstore desires to buy a new coding machine to help control book inventories.The machine sells for $36 586 and requires working capital of $4000.Its estimated useful life is five years and will have a salvage value of $4000.Recovery of working capital will be $4000 at the end of its useful life.Annual cash savings from the purchase of the machine will be $10 000.
Required:
a.Compute the net present value at a 14% required rate of return.
b.Compute the internal rate of return.
c.Determine the discounted payback period of the investment.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Book & Bible Bookstore Desires to Buy a New Coding