Answered: Tyler, Inc., is considering switching…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 15E: Gina Ripley, president of Dearing Company, is considering the purchase of a computer-aided...

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Question

Tyler, Inc., is considering switching to a new production technology. The cost of the required equipment will be $3,764,394 . The discount rate is 13.01 percent. The cash flows that the firm expects the new technology to generate are as follows.

Years		CF
0		$(3,764,394)
1–2		0
3–5		$878,248
6–9		$1,534,992

Compute the payback and discounted payback periods for the project. (Round answers to 2 decimal places, e.g. 15.25.)

The payback for the project is ............

years, and the discounted payback period is...........

years.

What is the NPV for the project? Should the firm go ahead with the project? (Round answer to 2 decimal places, e.g. 15.25.)

The NPV of the project is $

, and using the NPV rule the project should be

rejected/ accepted

What is the IRR, and what would be the decision based on the IRR? (Round answer to 2 decimal places, e.g. 15.25.)

The IRR of the project is

%, and using the IRR rule the project should be...................

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