(Ignore income taxes in this problem.) Joe Flubup is the president of Flubup, In
ID: 2348017 • Letter: #
Question
(Ignore income taxes in this problem.) Joe Flubup is the president of Flubup, Inc. He is considering buying a new machine that would cost $25,470. Joe has determined that the new machine promises an internal rate of return of 14%, but Joe has misplaced the paper which tells the annual cost savings promised by the new machine. He does remember that the machine has a projected life of 12 years. Based on these data, the annual cost savings are:A. $4,500.00
B. It is impossible to determine from the given data.
C. $4,650.00
D. $2,122.50
Explanation / Answer
Using financial calculator, we plug the number in as follows: PV = 25,470 Int = 14% N = 12 Compute PMT We get the PMT of $4500 (A)
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