Santana Rey is considering the purchase of equipment for Business Solutions that would allow the company to add a new product to its computer furniture line. The equipment is expected to cost $355,200 and to have a six-year life and no salvage value. The equipment is expected to generate income of $14,639 and net cash flow of $69,980 in each year of its six-year life. Santana requires an 6% return on all Investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) (Negative net present values should be Indicated with a minus sign. Do not round Intermediate calculations. Round your present value factor to 4 decimals and final answers to the nearest whole number.) Required: 1-a. Compute the payback period for this equipment. 1-b. Compute the net present value for this equipment. 1-c. Compute Internal rate of return for this equipment. 2. If Santana requires Investments to have payback periods of four years or less, should she invest in this equipment? 3. If Santana requires Investments to have at least an 6% Internal rate of return, should she invest in this equipment? Complete this question by entering your answers in the tabs below. Req 1A Re Numerator: Initial investment eq 1C Compute the payback period for this equipment. Req 2 and 3 1 Payback Period Denominator: Annual net cash flow < Prev Q Search Payback period 41 of 41 HE Next ENG
Santana Rey is considering the purchase of equipment for Business Solutions that would allow the company to add a new product to its computer furniture line. The equipment is expected to cost $355,200 and to have a six-year life and no salvage value. The equipment is expected to generate income of $14,639 and net cash flow of $69,980 in each year of its six-year life. Santana requires an 6% return on all Investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) (Negative net present values should be Indicated with a minus sign. Do not round Intermediate calculations. Round your present value factor to 4 decimals and final answers to the nearest whole number.) Required: 1-a. Compute the payback period for this equipment. 1-b. Compute the net present value for this equipment. 1-c. Compute Internal rate of return for this equipment. 2. If Santana requires Investments to have payback periods of four years or less, should she invest in this equipment? 3. If Santana requires Investments to have at least an 6% Internal rate of return, should she invest in this equipment? Complete this question by entering your answers in the tabs below. Req 1A Re Numerator: Initial investment eq 1C Compute the payback period for this equipment. Req 2 and 3 1 Payback Period Denominator: Annual net cash flow < Prev Q Search Payback period 41 of 41 HE Next ENG
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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I do not understand the PV and cannot find the appropriate table for this?
Transcribed Image Text:Santana Rey is considering the purchase of equipment for Business Solutions that would allow the company to add a new product to
Its computer furniture line. The equipment is expected to cost $355,200 and to have a six-year life and no salvage value. The
equipment is expected to generate income of $14,639 and net cash flow of $69,980 in each year of its six-year life. Santana requires
an 6% return on all Investments. (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)
(Negative net present values should be Indicated with a minus sign. Do not round Intermediate calculations. Round your present
value factor to 4 decimals and final answers to the nearest whole number.)
Required:
1-a. Compute the payback period for this equipment.
1-b. Compute the net present value for this equipment.
1-c. Compute internal rate of return for this equipment.
2. If Santana requires Investments to have payback periods of four years or less, should she invest in this equipment?
3. If Santana requires Investments to have at least an 6% Internal rate of return, should she invest in this equipment?
Complete this question by entering your answers in the tabs below.
Req 1A
Re
Numerator:
Initial investment
eq 1C
Compute the payback period for this equipment.
Req 2 and 3
1
Payback Period
Denominator:
Annual net cash flow
< Prev
Q Search
Payback period
41 of 41 H
H
Next
ENG
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