Exercise 12-15 (Algo) Internal Rate of Return and Net Present Value [LO12-2, LO12-3] Henrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $137,320, including freight and installation. Henrie's estimated the new machine would increase the company's cash inflows, net of expenses, by $40,000 per year. The machine would have a five-year useful life and no salvage value. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table. Required: 1. What is the machine's internal rate of return? (Round your answer to the nearest whole percentage, i.e. 0.123 should be considered as 12%.) 2. Using a discount rate of 14%, what is the machine's net present value? Interpret your results. 3. Suppose the new machine would increase the company's annual cash inflows, net of expenses, by only $38,090 per year. Under these conditions, what is the internal rate of return? (Round your answer to the nearest whole percentage, i.e. 0.123 should be considered as 12%.)
Exercise 12-15 (Algo) Internal Rate of Return and Net Present Value [LO12-2, LO12-3] Henrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $137,320, including freight and installation. Henrie's estimated the new machine would increase the company's cash inflows, net of expenses, by $40,000 per year. The machine would have a five-year useful life and no salvage value. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table. Required: 1. What is the machine's internal rate of return? (Round your answer to the nearest whole percentage, i.e. 0.123 should be considered as 12%.) 2. Using a discount rate of 14%, what is the machine's net present value? Interpret your results. 3. Suppose the new machine would increase the company's annual cash inflows, net of expenses, by only $38,090 per year. Under these conditions, what is the internal rate of return? (Round your answer to the nearest whole percentage, i.e. 0.123 should be considered as 12%.)
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 15E
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Ashvin
![Exercise 12-15 (Algo) Internal Rate of Return and Net Present Value [LO12-2, LO12-3]
Henrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost
$137,320, including freight and installation. Henrie's estimated the new machine would increase the company's cash inflows, net of
expenses, by $40,000 per year. The machine would have a five-year useful life and no salvage value.
Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table.
Required:
1. What is the machine's internal rate of return? (Round your answer to the nearest whole percentage, i.e. 0.123 should be
considered as 12%.)
2. Using a discount rate of 14%, what is the machine's net present value? Interpret your results.
3. Suppose the new machine would increase the company's annual cash inflows, net of expenses, by only $38,090 per year. Under
these conditions, what is the internal rate of return? (Round your answer to the nearest whole percentage, i.e. 0.123 should be
considered as 12%.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F10d32fe6-4153-47c5-b5ab-f6b6938c8cc8%2Fc1222968-78e0-45fa-8c22-82f0f3500a0d%2F1fkzvnj_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Exercise 12-15 (Algo) Internal Rate of Return and Net Present Value [LO12-2, LO12-3]
Henrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost
$137,320, including freight and installation. Henrie's estimated the new machine would increase the company's cash inflows, net of
expenses, by $40,000 per year. The machine would have a five-year useful life and no salvage value.
Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table.
Required:
1. What is the machine's internal rate of return? (Round your answer to the nearest whole percentage, i.e. 0.123 should be
considered as 12%.)
2. Using a discount rate of 14%, what is the machine's net present value? Interpret your results.
3. Suppose the new machine would increase the company's annual cash inflows, net of expenses, by only $38,090 per year. Under
these conditions, what is the internal rate of return? (Round your answer to the nearest whole percentage, i.e. 0.123 should be
considered as 12%.)
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