To be convincing, sufficient support for your recommendations must be provided in order to be considered valid and accepted.
| Existing Equipment |
| Original Cost |
60,000 |
| Present Book Value |
30,000 |
| Annual Cash Operating Costs |
145,000 |
| Current Market Value |
15,000 |
| Market Value in Ten Years |
0 |
| Remaining useful Life |
10 years |
| Replacement Equipment |
| Cost |
600,000 |
| Annual Cash Operating Costs |
50,000 |
| Market Value in Ten Years |
0 |
| Useful Life |
10 years |
| Other Information |
| Cost of Capital |
10% |
| Payback requirement |
6 years |
In this assignment, use the information above to develop a comprehensive analysis using NPV, Payback Method, and IRR to develop a recommendation on replacing the existing equipment with a new computerized version.
Using your knowledge of capital budgeting techniques, explain how principles of capital budgeting, Calculate the payback method, IRR, and NPV, and how it can be used to assess the potential projects and assist in the decision-making process.
Calcualte the NPV, the IRR and payback method for this project.