Help Rundle Electronics is considering investing in manufacturing equ.docx - Help Rundle Electronics is considering investing in manufacturing

# Help Rundle Electronics is considering investing in manufacturing equ.docx

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Help Rundle Electronics is considering investing in manufacturing equipment expected to cost \$320,000. The equipment has an estimated useful life of four years and a salvage value of \$ 19,000. It is expected to produce incremental cash revenues of \$160,000 per year Rundle has an effective income tax rate of 30 percent and a desired rate of return of 12 percent. (PV of \$1 and PVA of \$1) (Use appropriate factor(s) from the tables provided.) Required a. Determine the net present value and the present value index of the investment, assuming that Rundle uses straight-line depreciation for financial and income tax reporting b. Determine the net present value and the present value index of the investment, assuming that Rundle uses double- declining balance depreciation for financial and income tax reporting d. Determine the payback period and unadjusted rate of return (use average investment), assuming that Rundle uses straight-line depreciation. e. Determine the payback perio and unadjusted rate of return (use average investment), assuming that Rundle uses double- declining-balance depreciation. (Note: Use average annual cash flow when

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• Spring '19
• Prof. Adnan Hamideh

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