30. Financial Break-Even The Cornchopper Company is considering the purchase of a new harvester. Cornchopper has hired you to determine the break-even purchase price in terms of present value of the harvester. This break- even purchase price is the price at which the project's NPV is zero. Base your analysis on the following facts: • The new harvester is not expected to affect revenue, but pretax operating expenses will be reduced by $13,000 per year for 10 years. • The old harvester is now 5 years old, with 10 years of its scheduled life remaining. It was originally purchased for $65,000 and has been depreciated by the straight-line method. • The old harvester can be sold for $21,000 today. • The new harvester will be depreciated by the straight-line method over its 10-year life. • The corporate tax rate is 22 percent. • The firm's required rate of return is 15 percent. • The initial investment, the proceeds from selling the old harvester, and any resulting tax effects occur immediately. • All other cash flows occur at year-end. • The market value of each harvester at the end of its economic life is zero.

How long does it take you to eliminate the debt?

be appropriate? Explain. 8.4 Average Accounting Return Concerning AAR: LO 2 Describe how the average accounting return is usually calculated and describe the information this measure provides about a sequence of cash flows. What is the AAR criterion decision rule? a. b. What are the problems associated with using the AAR as a means of evaluating a project's cash flows? What underlying feature of AAR is most troubling to you from a financial perspective? Does the AAR have any redeeming qualities?

"Financing capotal projects from loans over a long period of time forces the present and future users to pay for and enjoy the benefits at the same time" Discuss