Question

Basic Concepts

Roberts Company is considering an investment in equipment that is capable of producing more efficiently than the current technology. The outlay required is $2,066,667. The equipment is expected to last five years and will have no salvage value. The expected cash flows associated with the project are as follows:

Year	Cash Revenues	Cash Expenses
1	$2,930,000	$2,310,000
2	2,930,000	2,310,000
3	2,930,000	2,310,000
4	2,930,000	2,310,000
5	2,930,000	2,310,000

The present value tables provided in Exhibit 19B.1 and Exhibit 19B.2 must be used to solve the following problems.

Required:

1. Compute the project’s payback period. If required, round your answer to two decimal places.
years

ans: 3.33 years

2. Compute the project’s accounting rate of return. Enter your answer as a whole percentage value (for example, 16% should be entered as "16" in the answer box).
ans. 10%

3. Compute the project’s net present value, assuming a required rate of return of 10 percent. When required, round your answer to the nearest dollar.
ans: $

4. Compute the project’s internal rate of return. Enter your answers as whole percentage values.

ans: Between______ % and______ %

Answer 1