I-24.04 Problem

I-24.04 Problem - The company uses 8% as its assumed rate...

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I-24.04 Chip's Wood Chipping Service has limited cash to invest in new equipment. Chip is considering buying a wood chipper, a new truck, a stump grinder, or a lift rig. Each item has a purchase price of $50,000. Below is a table of information about the equipment items: Useful Life Annual Cash Return (assume end of year) Chipper 3 $18,360 Truck 5 $12,195 Grinder 7 $9,935 Lift rig 9 $6,422 Chip's uses straight-line depreciation and all equipment is assumed worthless at the end of its useful life.
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Unformatted text preview: The company uses 8% as its assumed rate of return in calculating the net present value of investments. Form a four-person team. Each team member should select one of the capital budgeting/evaluation methods (i.e., net present value, internal rate of return, accounting rate of return, or payback), and rank order the four investment alternatives. Compare and contrast each team member's results, and discuss the implications for decision making....
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This note was uploaded on 02/29/2012 for the course ACCOUNTING 101 taught by Professor Hudack during the Spring '11 term at FIU.

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