(Answered) Question - whipple company wants to buy a numerically

Accounting

Question - Whipple Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of tractors. The outlay required is $480,000. The NC equipment will last five years with no expected salvage value. The expected after-tax cash flows associated with the project follow:

Year 1 Cash Revenues Cash Expenses

1 $780,000 $600,000

2 780,000 600,000

3 780,000 600,000

4 780,000 600,000

5 780,000 600,000

1. Compute the payback period for the NC equipment.

2. Compute the NC equipment's ARR

3. Compute the investments NPV, assuming a required rate of return of 10 percent

4. Compute the investments IRR.

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