Redman Company is considering an investment in new machinery.The details of the investment are as follows:
The company uses straight-line depreciation for its machinery and requires a 12% rate of return.The present value of $1 for 4 years at 12% is 0.636.The present value of an ordinary annuity for $1 for 4 years at 12% is 3.037.
(1)What is the payback period? (Round your answer to one decimal place. )
(2)What is the rate of return on average investment? (Round your percentage to one decimal place. )
(3)What is the net present value?
(4)Would you advise the company to invest in this machinery?

Question

Redman Company is considering an investment in new machinery.The details of the investment are as follows:
  The company uses straight-line depreciation for its machinery and requires a 12% rate of return.The present value of $1 for 4 years at 12% is 0.636.The present value of an ordinary annuity for $1 for 4 years at 12% is 3.037.
(1)What is the payback period? (Round your answer to one decimal place. )
(2)What is the rate of return on average investment? (Round your percentage to one decimal place. )
(3)What is the net present value?
(4)Would you advise the company to invest in this machinery?

Quizplus · Accepted Answer

The Answer of Redman Company is considering an investment in new machinery.The details of the investment are as follows:
  The company uses straight-line depreciation for its machinery and requires a 12% rate of return.The present value of $1 for 4 years at 12% is 0.636.The present value of an ordinary annuity for $1 for 4 years at 12% is 3.037.
(1)What is the payback period? (Round your answer to one decimal place. )
(2)What is the rate of return on average investment? (Round your percentage to one decimal place. )
(3)What is the net present value?
(4)Would you advise the company to invest in this machinery?

Redman Company Is Considering an Investment in New Machinery