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Chapter 10 ? P4. Edge Company_Capital Investment Decision




Question;Capital Investment Decision: Comprehensive;Chapter 10 ? P4. Edge Company?s Production;vice president believes keeping up-to-date with technological changes is what;makes the company successful and feels that a machine introduced recently would;fill an important need. The machine has an estimated useful life of four years;a purchase price of $250,000 and a residual value of $25,000. The company;controller has estimated average annual net income of $11,250 and the following;cash flows for the new machines;Cash;flow Estimates;Year Cash inflows Cash outflows Net cash;Inflows;1 $325,000 $250,000;$75,000;2 320,000;250,000 70,000;3;315,000 250,000 65,000;4;310,000 250,000 60,000;The company uses a 12% minimum rate of return;and a three-year payback period for capital investment evaluation processes.;Compute;a.;Net present value;b.;Accounting rate of return;c.;Payback period


Paper#37303 | Written in 18-Jul-2015

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