Yoshika Landscaping is contemplating purchasing a new ditch-digging machine that promises savings of $5,600 per year for 10 years. The machine costs $21,970 and no salvage value is expected. The company's cost of capital is 12%. You have been asked to advise Yoshika relative to this capital investment decision. As part of your analysis, compute:
What factors besides your quantitative analysis should be considered in making this decision?© BrainMass Inc. brainmass.com June 3, 2020, 7:17 pm ad1c9bdddf
1. The payback period.
Payback = Year before full recovery + Unrecovered ost at start of year
Cash flow during year
2. The unadjusted rate of return.
= Average cash flows - depreciation
3. The net present value.
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