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Clarissa Hardware is currently considering the purchase equipment that costs $55 000. As a result of...

Clarissa Hardware is currently considering the purchase equipment that costs $55 000. As a result of the purchase, it will generate some additional cash flows for the company.

The cash inflows for the years are given as follows:

The first three years - $8 000 per year, the fourth year - $10 000 and the fifth year to the seventh year - $15 000 per year. Assuming the required rate of return = 3%

Assessment Task

Calculate:

  1. Discounted payback period                                                                                                              
  1. Net Present Value                                                                                                                                (
  1. Internal rate of return                                                                                                                           (

Should the company go ahead with the purchase? Why?                           

Solutions

Expert Solution

The company should go ahead with the project

jeff jeffy answered 1 year ago
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