Q1) Rondello Company is thinking of a capital investment of $150,000 in extra productive facilities. New machinery is expected to have useful life of 5 years with no salvage value. Depreciation is by straight-line method. In the life of investment, annual net income and cash inflows are expected to be $18,000 and $48,000, respectively. Rondello has 12% cost of capital rate, determine the minimum acceptable rate of return on investment.
Using the discounted cash flow technique, compute the net present value.