Acme Company is considering investing in a new machine that costs $62,260 and th
ID: 2448761 • Letter: A
Question
Acme Company is considering investing in a new machine that costs $62,260 and that has a useful life of 12 years with no salvage value. The machine will generate $11,000 annually in net cash inflows. The internal rate of return on the investment is: (Round your intermediate calculations to 3-decimals and your internal rate of return calculations to the nearest whole percent.)
Acme Company is considering investing in a new machine that costs $62,260 and that has a useful life of 12 years with no salvage value. The machine will generate $11,000 annually in net cash inflows. The internal rate of return on the investment is: (Round your intermediate calculations to 3-decimals and your internal rate of return calculations to the nearest whole percent.)
Explanation / Answer
Statemnet showing Cash flows Particulars Time PVf@15% Amount PV Cash Outflows - 1.00 (62,260.00) (62,260.00) PV of Cash outflows (62,260.00) Cash inflows 1.00 0.8696 11,000.00 9,565.22 Cash inflows 2.00 0.7561 11,000.00 8,317.58 Cash inflows 3.00 0.6575 11,000.00 7,232.68 Cash inflows 4.00 0.5718 11,000.00 6,289.29 Cash inflows 5.00 0.4972 11,000.00 5,468.94 Cash inflows 6.00 0.4323 11,000.00 4,755.60 Cash inflows 7.00 0.3759 11,000.00 4,135.31 Cash inflows 8.00 0.3269 11,000.00 3,595.92 Cash inflows 9.00 0.2843 11,000.00 3,126.89 Cash inflows 10.00 0.2472 11,000.00 2,719.03 Cash inflows 11.00 0.2149 11,000.00 2,364.38 Cash inflows 12.00 0.1869 11,000.00 2,055.98 PV of Cash Inflows 59,626.81 NPV (2,633.19) Particulars Time PVf@13% Amount PV Cash Outflows - 1.00 (62,260.00) (62,260.00) PV of Cash outflows (62,260.00) Cash inflows 1.00 0.8850 11,000.00 9,734.51 Cash inflows 2.00 0.7831 11,000.00 8,614.61 Cash inflows 3.00 0.6931 11,000.00 7,623.55 Cash inflows 4.00 0.6133 11,000.00 6,746.51 Cash inflows 5.00 0.5428 11,000.00 5,970.36 Cash inflows 6.00 0.4803 11,000.00 5,283.50 Cash inflows 7.00 0.4251 11,000.00 4,675.67 Cash inflows 8.00 0.3762 11,000.00 4,137.76 Cash inflows 9.00 0.3329 11,000.00 3,661.73 Cash inflows 10.00 0.2946 11,000.00 3,240.47 Cash inflows 11.00 0.2607 11,000.00 2,867.67 Cash inflows 12.00 0.2307 11,000.00 2,537.76 PV of Cash Inflows 65,094.12 NPV 2,834.12 PVF @13% 2,834.12 PVF @15% (2,633.19) Diff @2% 5,467.31 IRR = 13% + 2% *2834.12/5467.31 IRR = 14.04% Approx
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