Donna just graduated from college. Since she is starting her own business, it's time to upgrade from her clunker to a reliable vehicle. Donna has the option to purchase a new car for her business at a cost of $27.222 (life of 7 years with no salvage value), estimating that it would help her bring in additional annual net operating cash flows of $7,800 over the life of the car. Determine the simple payback period and the IRR for this investment. Donna expects her business income to be subject to a 30% tax rate. (Round simple payback perlod to 3 decimal places, e.g. 15.256 and IRR to 2 decimal places, e.g. 15.25%. Round intermediate calculations to 2 decimal places, e.g. 15.25.) Simple payback period IRR 3.490 years 5.91 %
Donna just graduated from college. Since she is starting her own business, it's time to upgrade from her clunker to a reliable vehicle. Donna has the option to purchase a new car for her business at a cost of $27.222 (life of 7 years with no salvage value), estimating that it would help her bring in additional annual net operating cash flows of $7,800 over the life of the car. Determine the simple payback period and the IRR for this investment. Donna expects her business income to be subject to a 30% tax rate. (Round simple payback perlod to 3 decimal places, e.g. 15.256 and IRR to 2 decimal places, e.g. 15.25%. Round intermediate calculations to 2 decimal places, e.g. 15.25.) Simple payback period IRR 3.490 years 5.91 %
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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Transcribed Image Text:Donna just graduated from college. Since she is starting her own business, it's time to upgrade from her clunker to a reliable vehicle.
Donna has the option to purchase a new car for her business at a cost of $27.222 (life of 7 years with no salvage value), estimating that
it would help her bring in additional annual net operating cash flows of $7,800 over the life of the car.
Determine the simple payback period and the IRR for this investment. Donna expects her business income to be subject to a 30 % tax
rate. (Round simple payback period to 3 decimal places, e.g. 15.256 and IRR to 2 decimal places, e.g. 15.25%. Round intermediate calculations
to 2 decimal places, e.g. 15.25.)
Simple payback period
IRR
3.490 years
5.91
%
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