Question

# Basic Concepts Roberts Company is considering an investment in equipment that is capable of producing more...

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______ %

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