Question: Payback, Accounting Rate of Return, Net Present Value, Internal Rate of Return Craig 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 $640,000. The NC equipment will last five years with no expected salvage value. The expected after-tax cash flows associated with the project follow:
Required: 1. Compute the payback period for the NC equipment.
2. Compute the NC equipment's ARR.
3. Compute the investment's NPV, assuming a required rate of return of 10 percent.
4. Compute the investment's IRR.