If an asset costs $180000 and is expected to have a $36000 salvage value at the

Question

If an asset costs $180000 and is expected to have a $36000 salvage value at the end of its 10-year life, and generates annual net cash inflows of $36000 each year, the cash payback period is

6 years.

Use the following table,

$60000.

If a company's required rate of return is 10% and, in using the net present value method, a project's net present value is zero, this indicates that the

project's rate of return is less than the minimum rate required.

Novak Corp. has an 8% required rate of return. It’s considering a project that would provide annual cost savings of $76000 for 5 years. The most that Johnson would be willing to spend on this project is

Explanation / Answer

1 Cash payback period = 180000/36000 = 5 years. 2 Net present value = (120000*2.531)-300000= $3720 3 Project earns a rate of return of 10%. 4 most that Johnson would be willing to spend on this project = 76000*3.993= $303468

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