Quik Cleaners has been considering the purchase of an industrial dry-cleaning machine. Use the following information to help Quik Cleaners make its decision.
- Purchase Price $ 90,000 Salvage value $6,000
- Useful Life 6 years Rate of Return on Investment 8%
- Annual Net Income $5,500 Depreciation Method: Straight-line
a. What is the Net Present Value for the dry-cleaning machine's capital budget project?
b. What is the Internal Rate of Return as a % for the dry-cleaning machine project?
c. What is the Cash Payback in years for the dry-cleaning machine's capital budget project?
d. What is the Accrual Accounting Rate of Return as a % for the dry-cleaning machine?
e. What is your overall suggestion to Quik Cleaners based on purchasing the dry-cleaning machine?