chapter 24 - Group 6 Chapter 24 We have Cost of Mixer =...

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Group 6 Chapter 24: We have: Cost of Mixer = $12000 Life of machine = 5 years Salvage value = $2000 Reduction in operating cost per year = $1000 (it is assumed that it is the sole benefit as no further information given about other profits) Depreciation per year (straight line method) = $2000 (12000 - 2000)/5 Operating cash flow per year = benefits + provision of depreciation = $3000(1000+2000) 1/ Payback Period = Net Investment / Annual cash inflow = 3.33 years (12000 - 2000) /3000 or Payback Period = 3 years and 4 months 2/ ARR = Average Accounting profit / Average Investment = 8.34% (1000/12000) 3/ IRR (the discount rate) that Present value of cash inflows = present value of investments.
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