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Unformatted text preview: 56,865 Salvage value of equipment 5 3,000 x 0.621 = 1,863 Net present value $ 1,863 3. Lynch Company has gathered the following data on a proposed investment project: Investment required in equipment $1,200,000 Annual cash inflows $240,000 Salvage value $0Life of the investment 10 years Discount rate 10% What is the payback period for the investment? Solution: Payback period = Required investment ÷ Annual cash inflows Payback period = $1,200,000 ÷ $240,000 = 5 years 4. Lynch Company has gathered the following data on a proposed investment project: Investment required in equipment $1,200,000 Annual cash inflows $240,000 Salvage value $0Life of the investment 10 years Discount rate 10% What is the simple rate of return on the investment? Solution: Annual cash flows ÷ Investment required = Simple rate of return $240,000 ÷ $1,200,000 = 20%...
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 Summer '11
 sahay
 Net Present Value, cash inflows, annual cash inflows, Lynch Company

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