A company has to decide between two machines that do the same job but have different lives. Which machine should the company buy, at an interest rate of 14%, based on the principle of internal rate of return? Assume a financing rate of 11%. Assume that required service period is indefinite and both projects can be repeated at the same cost in the future. Click the icon to view the cash flows for the projects. Click the icon to view the interest factors for discrete compounding when i = 11% per year. Click the icon to view the interest factors for discrete compounding when i = 14% per year. Compute the internal rate of return on the incremental investment. Select the correct choice below and, if necessary, fill in the answer box(es) to complete your answer. * ○ A. Incremental investment has only one positive i of * B. Incremental investment has two positive i values of * ○ C. Incremental investment has no positive / values. %. (Round to one decimal place.) % and %. (Round to one decimal place. Enter values in ascending order.) More Info Machine A Net Cash Flow Machine B - $44,000 - $62,000 - $18,000 - $13,000 - $18,000 - $13,000 - $18,000 - $13,000 - $13,000 -
A company has to decide between two machines that do the same job but have different lives. Which machine should the company buy, at an interest rate of 14%, based on the principle of internal rate of return? Assume a financing rate of 11%. Assume that required service period is indefinite and both projects can be repeated at the same cost in the future. Click the icon to view the cash flows for the projects. Click the icon to view the interest factors for discrete compounding when i = 11% per year. Click the icon to view the interest factors for discrete compounding when i = 14% per year. Compute the internal rate of return on the incremental investment. Select the correct choice below and, if necessary, fill in the answer box(es) to complete your answer. * ○ A. Incremental investment has only one positive i of * B. Incremental investment has two positive i values of * ○ C. Incremental investment has no positive / values. %. (Round to one decimal place.) % and %. (Round to one decimal place. Enter values in ascending order.) More Info Machine A Net Cash Flow Machine B - $44,000 - $62,000 - $18,000 - $13,000 - $18,000 - $13,000 - $18,000 - $13,000 - $13,000 -
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:A company has to decide between two machines that do the same job but have different lives. Which machine should the company buy, at an interest rate of 14%, based on the principle of internal
rate of return? Assume a financing rate of 11%. Assume that required service period is indefinite and both projects can be repeated at the same cost in the future.
Click the icon to view the cash flows for the projects.
Click the icon to view the interest factors for discrete compounding when i = 11% per year.
Click the icon to view the interest factors for discrete compounding when i = 14% per year.
Compute the internal rate of return on the incremental investment. Select the correct choice below and, if necessary, fill in the answer box(es) to complete your answer.
*
○ A. Incremental investment has only one positive i of
*
B. Incremental investment has two positive i values of
*
○ C. Incremental investment has no positive / values.
%. (Round to one decimal place.)
% and
%. (Round to one decimal place. Enter values in ascending order.)
More Info
Machine A
Net Cash Flow
Machine B
- $44,000
- $62,000
- $18,000
- $13,000
- $18,000
- $13,000
- $18,000
- $13,000
- $13,000
-
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