Assumptions: Jordan and Taylor want to purchase a new 60 quart floor mixer for $

Question

Assumptions: Jordan and Taylor want to purchase a new 60 quart floor mixer for $12,000. This machine would have a 5 year life with a salvage value of $2,000. The new machine would decrease operating costs by $1,000 each year of its economic life. The straight-line depreciation method would be used for the new machine. The cost of capital is 6%. Before they spend the money, they have asked you to calculate outcomes with capital investment models. Hints: Treat the Operating Costs Savings as Revenue. You will need to Calculate Depreciation Using the information provided. Remember that Depreciation is a non-cash expense item as you perform your analysis.

1. what is the payback period

2. what is the annual rate of return

3. what is the internal rate of return

4. what is net present value

5. what is profitability index

Explanation / Answer

Assumptions: Jordan and Taylor want to purchase a new 60 quart floor mixer for $

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