Homework answers / question archive / Merrill Productions is considering the purchase of a new movie camera, which will be used for major motion pictures

Merrill Productions is considering the purchase of a new movie camera, which will be used for major motion pictures

Accounting

Share With

Merrill Productions is considering the purchase of a new movie camera, which will be used for major motion pictures. The new camera will cost $30,000, have an eight-year life, and create cost savings of $5,000 per year. The new camera will require $700 of maintenance each year. Merrill Productions uses a discount rate of 9 percent.

Present value tables or a financial calculator are required.

1. Compute the net present value of the new camera.
2. Determine the payback period.