4. In addition to the data given previously, assume that the machine will have a $13,755 salvage value at the end of six years.Under these conditions, what is the internal rate of return? (Hint: You may find it helpful to use the net present value approach;find the discount rate that will cause the net present value to be closest to zero.) (Round your final answer to the nearestwhole percentage.) Wendell's Donut Shoppe is investigating the purchase of a new $34,600 donut-making machine. The new machine wouldpermit the company to reduce the amount of part-time help needed, at a cost savings of $6,500 per year. In addition, the newmachine would allow the company to produce one new style of donut, resulting in the sale of 2,500 dozen more donuts eachyear. The company realizes a contribution margin of $1.60 per dozen donuts sold. The new machine would have a six-yearuseful life.

The internal rate of return is the method of finding the profitability of a project by finding out…

4. In addition to the data given previously, assume that the machine will have a $13,755 salvage value at the end of six years. Under these conditions, what is the internal rate of return? (Hint: You may find it helpful to use the net present value approach; find the discount rate that will cause the net present value to be closest to zero.) (Round your final answer to the nearest

4. In addition to the data given previously, assume that the machine will have a $13,755 salvage value at the end of six years. Under these conditions, what is the internal rate of return? (Hint: You may find it helpful to use the net present value approach; find the discount rate that will cause the net present value to be closest to zero.) (Round your final answer to the nearest

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

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You are thinking of building a new machine that will save you $2,000 in the first year. The machine will then begin to wear out so that the savings decline at a rate of 1% per year forever. What is the present value of the savings if the interest rate is 8% per year? The present value of the savings is $ (Round to the nearest dollar.) Enter your answer in the answer box and then click Check Answer. All parts Clear All
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