Homework Answers
| Pay back Period=(Cost of machine-Salvage value receivable in case of old asset)/increased income | ||||||||||||||
| Pay back period=(60000-5000)/18000 | ||||||||||||||
| 3.06 years | ||||||||||||||
| Year | Cash flow | PVF@ 20% | DISCF | pvf@ 15% | DISCF | |||||||||
| 0 | 55,000.00 | 1 | 55,000.00 | 1 | 55,000.00 | |||||||||
| 1--5 | 18,000.00 | 2.99 | 53,820.00 | 3.352 | 60,336.00 | |||||||||
| Internal rate of return(simple return)=small rate+(cash flow in small rate-target cash flow)/(cash flow in small rate-cash flow in big rate)*big rate-small rate | ||||||||||||||
| 15%+(60336-55000)/(60336-53820)*5 | ||||||||||||||
| 19.09% | ||||||||||||||
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