Mimi company is considering a capital investment of $240,000 in new equipment. The equipment is expected to have a 5-year useful life with no salvage value. Depreciation is computed by the straight line method. during the life of the investment. annual net income is expected to be $30,000. Mimi's minimum required rate of return is 10%. The present value of 1 for 5 periods at 10% is .621.
Present value of an annuity of 1:-
Period 8% 9% 10% 11% 12% 15% 16%
5 3.993 3.890 3.791 3.696 3.605 3.352 3.274
Instructions:
Compute each of the following
a) cash payback period.
b) net present value.
c) annual rate of return
d) internal rate of return