Create a spreadsheet to compute the npv and payback period, Ask an Expert

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Create a spreadsheet to compute the NPV and payback period to assist with a purchase decision. Use to results to answer questions about your findings.

Scenario: Amazon.com is planning to purchase a new bar-coding machine for one of its warehouses. You have been asked to prepare a simple analysis to determine whether Amazon should purchase the machine. The bar coding machine costs $60,000. It has a 5 year economic life and an estimated residual value of $10,000. The estimated annual net cash flow from the machine is $16,000. Amazon.com's required rate of return is 16%.

Once the spreadsheet is completed answer the following questions:

1. What is the machine's NPV?

2. What is the machine's payback period?

3. Should Amazon.com purchase the machine? Why or why not?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9801237

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