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E26-13 Rondello Company is considering a capital investment of $150,000 in additional productive facilities

E26-13 Rondello Company is considering a capital investment of $150,000 in additional productive facilities
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Solution Guide / Answer Key:

ACCOUNTING

E26-13 Rondello Company is considering a capital investment of $150,000 in additional productive facilities. The new machinery is expected to have a useful life of 5 years with no salvage value. Depreciation is by the straight-line method. During the life of the investment, annual net income and cash inflows are expected to be $18,000 and $48,000, respectively. Rondello has a 12% cost of capital rate, which is the minimum acceptable rate of return on the investment. (Round payback to 2 decimal places, e.g. 10.50. Round other answers to 0 decimals places, e.g. 125.)

Instructions
Compute the following:
Annual rate of return %
Cash payback period on the proposed capital expenditure years
Using the discounted cash flow technique, compute the net present value $

 

FILE: MS WORD

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