Click here to view Exhibit 13B-1 http://lectures.mhhe.com/connect/0078111005/Exh
ID: 2383073 • Letter: C
Question
Click here to view Exhibit 13B-1 http://lectures.mhhe.com/connect/0078111005/Exhibit/Exhibit%2013B-1.jpg
Exhibit 13B-2 - http://lectures.mhhe.com/connect/0078111005/Exhibit/Exhibit%2013B-2.jpg
to determine the appropriate discount factor(s) using tables.
Sunset Press has just purchased a new trimming machine that cost $34,840. The machine is expected to save $8,000 per year in cash operating costs and to have a 6-year life. Compute the machine’s internal rate of return. (Round discount factor(s) to 3 decimal places and final answer to the closest interest rate. Omit the "%" sign in your response.)
Consider each case below independently. (Ignore income taxes.)Click here to view Exhibit 13B-1 http://lectures.mhhe.com/connect/0078111005/Exhibit/Exhibit%2013B-1.jpg
Exhibit 13B-2 - http://lectures.mhhe.com/connect/0078111005/Exhibit/Exhibit%2013B-2.jpg
to determine the appropriate discount factor(s) using tables.
3a.Sunset Press has just purchased a new trimming machine that cost $34,840. The machine is expected to save $8,000 per year in cash operating costs and to have a 6-year life. Compute the machine’s internal rate of return. (Round discount factor(s) to 3 decimal places and final answer to the closest interest rate. Omit the "%" sign in your response.)
Internal rate of return %
3b. If the company’s required rate of return is 16%, did it make a wise investment? Yes No
Explanation / Answer
Sunset Press has just purchased a new trimming machine that cost $34,840. The machine is expected to save $8,000 per year in cash operating costs and to have a 6-year life. Compute the machine’s internal rate of return. (Round discount factor(s) to 3 decimal places and final answer to the closest interest rate. Omit the "%" sign in your response.) Dep pa = COst/Life = 34840/6 = $5,807 pa Net CF pa = 8000 So IRR using excel = IRR(CFs) = IRR(-34840,8000,8000,8000,8000,8000,8000) = Internal rate of return =10% 3b. If the company’s required rate of return is 16%, did it make a wise investment? No
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