Answered: $2.8 $1.8 S1.8 $1.8 S1.8 $1.8 $1.8 S1.8…

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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Question

ACME Corporation distributes agricultural equipment. The board of directors is considering a proposal to establish a facility to manufacture an electronically controlled "intelligent" crop sprayer invented by a professor at a local university. This crop-sprayer project would require an investment of $10 million in assets and would produce an annual after-tax net benefit of $1.8 million over a service life of eight years. All costs and benefits are included in these figures. When the project terminates, the net proceeds from the sale of the assets would be $1 million (as shown). Compute the rate of return of this project.

$2.8
$1.8
S1.8 $1.8 S1.8 $1.8 $1.8 S1.8
1
4
5
6
7
8.
Years
$10
Figure 7.2 Cash flow diagram for a simple invest-
ment; all dollar amounts are in millions of dollars
3.
2.

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