A newspaper is considering buying locked vending machines to replace open newspaper racks in the downtown area. The vending machines cost $75 each. It is expected that the annual revenue from selling the same quantity of newspapers will increase $12 per vending machine. The useful life of the vending machine is unknown. (a) To determine the sensitivity of rate of return to useful life, prepare a graph for rate of return versus useful life for lives up to 10 years. (b) If the newspaper requires a 15% rate of return, what minimum useful life must it obtain from the vending machines? (c) What would be the rate of return if the vending machines were to last indefinitely?

A newspaper is considering buying locked vending machines to replace open newspaper racks in the downtown area. The vending machines cost $75 each. It is expected that the annual revenue from selling the same quantity of newspapers will increase $12 per vending machine. The useful life of the vending machine is unknown. (a) To determine the sensitivity of rate of return to useful life, prepare a graph for rate of return versus useful life for lives up to 10 years. (b) If the newspaper requires a 15% rate of return, what minimum useful life must it obtain from the vending machines? (c) What would be the rate of return if the vending machines were to last indefinitely?

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter26: Capital Budgeting (capbud)

Section: Chapter Questions

Problem 5R

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