Whipple Company wishes to purchase the numerically controlled (NC) machine to be utilized in producing specially machined parts for manufacturers of tractors. Outlay needed is $480,000. NC equipment will last 5 years with no expected salvage value. Expected after-tax cash flows related with 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
i) Compute the payback period for the NC equipment.
ii) Compute the NC equipment's ARR
iii) Compute the investments NPV, assuming a required rate of return of 10 percent
iv) Compute the investments IRR.