The Valentine Company has decided to buy a machine costing $41,499. Estimated ca
ID: 2381707 • Letter: T
Question
The Valentine Company has decided to buy a machine costing $41,499. Estimated cash savings from using the new machine amount to $9,000 per year. The machine will have no salvage value at the end of its useful life of fourteen years. (Ignore income taxes.)
If Valentine's required rate of return is 13%, the machine's internal rate of return is closest to: (Round discount factor(s) to 3 decimal places and final answer to the closest interest rate.)
The Valentine Company has decided to buy a machine costing $41,499. Estimated cash savings from using the new machine amount to $9,000 per year. The machine will have no salvage value at the end of its useful life of fourteen years. (Ignore income taxes.)
Click here to view Exhibit 13B-2 to determine the appropriate discount factor(s) using tables.
If Valentine's required rate of return is 13%, the machine's internal rate of return is closest to: (Round discount factor(s) to 3 decimal places and final answer to the closest interest rate.)
The Valentine Company has decided to buy a machine costing $41,499. Estimated cash savings from using the new machine amount to $9,000 per year. The machine will have no salvage value at the end of its useful life of fourteen years. (Ignore income taxes.) If Valentine's required rate of return is 13%, the machine's internal rate of return is closest to: (Round discount factor(s) to 3 decimal places and final answer to the closest interest rate.) 18% 16% 14% 20%Explanation / Answer
$41499/$9000 =4.611
PVAF=4.611
From annuity exhibit table (life 14yrs):
we get 20%
Hence answer is option (d) i.e 20%
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