Sam's Structures desires to buy a new crane and accessories to help move and install modular buildings. The machine sells for $750,000 and requires working capital of $100,000. Its estimated useful life is six years and it will have a salvage value of $175,600. Recovery of working capital will be $100,000 at the end of its useful life. Annual cash savings from the purchase of the machine will be $200,000.
You are required to:
a. Compute the net present value at a 12% required rate of return.
b. Compute the internal rate of return.
c. Determine the payback period of the investment
Problem 2 Statement of Cash Flows
The financial statements of Prosperous Company appear below. All are in thousand Rupiahs. You are also provided with the following additional data:
1. Dividends declared and paid were Rp1.400.000.000
2. The number of common stock outstanding is 1,000,000 shares.
3. During the year, equipment was sold for Rp1.200.000.000 cash. This equipment cost Rp2.800.000.000 originally and had a book value of Rp1.200.000.000 at the time of sale.
4. All depreciation expense is in the selling expense category.
5. All sales and purchases are on account.
6. Accounts payable pertain to merchandise suppliers.
7. All operating expenses except for depreciation were paid in cash.