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A business firm is contemplating to purchase new equipment. The purchase price is 60,000 and its annual operating cost is 2,675.4. The machine has a life of 7 years and is expected to generate 15,000 in revenues in each year of its life. Determine the internal rate of return of the machine, assuming zero salvage value.

A business firm is contemplating to purchase new equipment. The purchase price is 60,000 and its annual operating cost is 2,675.4. The machine has a life of 7 years and is expected to generate 15,000 in revenues in each year of its life. Determine the internal rate of return of the machine, assuming zero salvage value.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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8. A business firm is contemplating to purchase new equipment. The purchase price is 60,000 and its annual operating cost is 2,675.4. The machine has a life of 7 years and is expected to generate 15,000 in revenues in each year of its life. Determine the internal rate of return of the machine, assuming zero salvage value. 9. The cash flow associated with a laboratory equipment are as follows: Year 0 -50,000 15,000 Year 1 to 5 At a MARR of 10% per year, calculate the machines net present value. 10. Determine the net present value of the following. Initial cost 10,000 Project life, Years Salvage value Annual revenues 10,000 60,000 Annual expenditures 22,000 Interest rate 15%
Transcribed Image Text:8. A business firm is contemplating to purchase new equipment. The purchase price is 60,000 and its annual operating cost is 2,675.4. The machine has a life of 7 years and is expected to generate 15,000 in revenues in each year of its life. Determine the internal rate of return of the machine, assuming zero salvage value. 9. The cash flow associated with a laboratory equipment are as follows: Year 0 -50,000 15,000 Year 1 to 5 At a MARR of 10% per year, calculate the machines net present value. 10. Determine the net present value of the following. Initial cost 10,000 Project life, Years Salvage value Annual revenues 10,000 60,000 Annual expenditures 22,000 Interest rate 15%
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