Answered: Hayden Company is considering the…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 3P

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Question

Hayden Company is considering the acquisition of a machine that costs $389,000. The machine is expected to have a useful life of six years, a negligible residual value, an annual net cash flow of $86,000, and annual operating income of $73,100. What is the estimated cash payback period for the machine (round to one decimal points)?

a.1.2 years

b.5.3 years

c.4.5 years

d.6.5 years

The expected average rate of return for a proposed investment of $4,540,000 in a fixed asset, using straight-line depreciation, with a useful life of 20 years, no residual value, and an expected total net income of $9,080,000 over the 20 years is (round to two decimal points).

a.10.00%

b.1.00%

c.20.00%

d.40.00%

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