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Morgan Company 180000

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Morgan Company is considering a capital investment of 180,000 in additional
productive facilities.The new machinery is expected to have a useful life of 6
years with no salvage value. Depreciation is by the straight-line method. During the life of the
investment, annual net income and cash inflows are expected to be $20,000 and
$50,000 respectively. Morgan has a 15% cost of capital rate, which is the minimum
acceptable rate of return on the investment.

(Round to two decimals.)
a) Compute (1) the cash payback period and (2) the annual rate of return on the proposed
capital expenditure.
(b) Using the discounted cash flow technique, compute the net present value.

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