1 Henrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $137,320, including freight and installation. Henrie's estimated the new machine would increase the company's cash inflows, net of expenses, by $40,000 per year. The machine would have a five-year useful life and no salvage value. Click here to view Exhibit 78-1 and Exhibit 78-2, to determine the appropriate discount factor(s) using table. 00:52:43 Required: 1. What is the machine's internal rate of return? Note: Round your answer to the nearest whole percentage, L.e. 0.123 should be considered as 12%. 2. Using a discount rate of 14%, what is the machine's net present value? Interpret your results. 3. Suppose the new machine would increase the company's annual cash inflows, net of expenses, by only $38.090 per year. Under these conditions, what is the internal rate of return? Note: Round your answer to the nearest whole percentage, L.e. 0.123 should be considered as 12%. 1. Internal rate of retur 2. Net present value 3. Internal rate of return 14 % 0 12 %
1 Henrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $137,320, including freight and installation. Henrie's estimated the new machine would increase the company's cash inflows, net of expenses, by $40,000 per year. The machine would have a five-year useful life and no salvage value. Click here to view Exhibit 78-1 and Exhibit 78-2, to determine the appropriate discount factor(s) using table. 00:52:43 Required: 1. What is the machine's internal rate of return? Note: Round your answer to the nearest whole percentage, L.e. 0.123 should be considered as 12%. 2. Using a discount rate of 14%, what is the machine's net present value? Interpret your results. 3. Suppose the new machine would increase the company's annual cash inflows, net of expenses, by only $38.090 per year. Under these conditions, what is the internal rate of return? Note: Round your answer to the nearest whole percentage, L.e. 0.123 should be considered as 12%. 1. Internal rate of retur 2. Net present value 3. Internal rate of return 14 % 0 12 %
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
A4
Transcribed Image Text:00:52:43
Henrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost
$137,320, including freight and installation. Henrie's estimated the new machine would increase the company's cash inflows, net of
expenses, by $40,000 per year. The machine would have a five-year useful life and no salvage value.
Click here to view Exhibit 78-1 and Exhibit 78-2. to determine the appropriate discount factor(s) using table.
Required:
1. What is the machine's internal rate of return?
Note: Round your answer to the nearest whole percentage, L.e. 0.123 should be considered as 12%.
2. Using a discount rate of 14%, what is the machine's net present value? Interpret your results.
3. Suppose the new machine would increase the company's annual cash inflows, net of expenses, by only $38,090 per year. Under
these conditions, what is the internal rate of return?
Note: Round your answer to the nearest whole percentage, Le. 0.123 should be considered as 12%.
1. Internal rate of return
2. Net present value
3. Internal rate of return
14%
0
12%
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 5 steps with 6 images
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education