Home Security Systems is analyzing the purchase of manufacturing equipment that will cost $92,000. The annual cash inflows for the next three years will be:
Year Cash flow 1 $ 41,000 2 39,000 3 34,000
(a) Determine the internal rate of return using interpolation. Use Appendix B and Appendix D. (Round "PV Factor" and intermediate to 3 decimal places. Round final answer to 2 decimal places. Omit the "%" sign in your response.)
Internal rate of return %
(b) With a cost of capital of 10 percent, should the machine be purchased?
Yes No
| Home Security Systems is analyzing the purchase of manufacturing equipment that will cost $92,000. The annual cash inflows for the next three years will be: |
| Year | Cash flow | |||
| 1 | $ | 41,000 | ||
| 2 | 39,000 | |||
| 3 | 34,000 | |||
| (a) | Determine the internal rate of return using interpolation. Use Appendix B and Appendix D. (Round "PV Factor" and intermediate to 3 decimal places. Round final answer to 2 decimal places. Omit the "%" sign in your response.) |
| Internal rate of return | % |
| (b) | With a cost of capital of 10 percent, should the machine be purchased? | ||||
|
Related questions
| The Pan American Bottling Co. is considering the purchase of a new machine that would increase the speed of bottling and save money. The net cost of this machine is $51,000. The annual cash flows have the following projections: Use Appendix B and Appendix D. |
| Year | Cash flow |
| 1 | $ 15,600 |
| 2 | 20,600 |
| 3 | 25,600 |
| 4 | 10,600 |
| 5 | 5,600 |
| (a) | If the cost of capital is 10 percent, what is the net present value of selecting a new machine? (Round "PV Factor" to 3 decimal places. Round all dollar values to the nearest dollar amount. Omit the "$" sign in your response.) |
| Net present value | $ |
| (b) | What is the internal rate of return? (Round "PV Factor" to 3 decimal places. Round all dollar values to the nearest dollar amount. Round your answer to 2 decimal places. Omit the "%" sign in your response.) |
| Internal rate of return | % |
| (c) | Should the project be accepted? | ||||
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| You will deposit $14,000 today. It will grow for 8 years at 10% interest compounded semiannually. You will then withdraw the funds annually over the next 6 years. The annual interest rate is 8%. Your annual withdrawal will be: Use Appendix A and Appendix D. (Round "PV Factor" and "FV Factor" to 3 decimal places.) |
$9,858
$7,866
$4,166
$6,611
| Lou Lewis borrows $12,000 to be repaid over 9 years at 8 percent. Repayment of principal in the first year is: Use Appendix D. (Round "PV Factor" to 3 decimal places. Round your intermediate calculations to the nearest dollar value.) |
$1,045
$1,921
$961
$1,188
| Mr. Blochirt is creating a college investment fund for his daughter. He will put in $6,000 per year for the next 16 years and expects to earn a 11% annual rate of return. How much money will his daughter have when she starts college? Use Appendix C. (Round "FV Factor" to 3 decimal places.) |
$235,140
$224,127
235,867
$223,114
PLEASE SHOW ALL WORK!! EVEN SIMPLE CALCULATIONS, THANKS
