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In: Accounting

Ripit Company wants to buy a numerically controlled (NC) machine to be used in producing specially...

Ripit Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of tractors The outlay required is $480,000. The NC equipment will last five years with no expected salvage value. The expected after-tax cash flows associated with the project follow:

Year               Cash Revenues       Cash Expenses

1                      $780,000                   $600,000

2                        780,000                     600,000

3                        780,000                     600,000

4                        780,000                     600,000

5                        780,000                     600,000

Required:

  1. Compute the payback period for the NC equipment.
  1. Compute the NC equipment's ARR.
  1. Compute the investment's NPV, assuming a required rate of return of 10 percent.
  1. Compute the investment's IRR.


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