Exercise 24-19 (Algo) Net present value; internal rate of return; equal cash flows LO P3, P4 Quary Company is considering an investment in machinery with the following information. The company's required rate of return is 12%. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Initial investment Useful life $ 201,000 Materials, labor, and overhead (except depreciation) 9 years Depreciation-Machinery $ 47,000 20,100 Salvage value Expected sales per year $ 20,100 11,000 units Selling, general, and administrative expenses Selling price per unit 7,000 $ 11 a. Compute the investment's net present value. b. Using the answer from part a, is the investment's internal rate of return higher or lower than 12%? Hint: It is not necessary to compute the IRR to answer this question. Complete this question by entering your answers in the tabs below. Required A Required B Compute the investment's net present value. Note: Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar. Years 1-9 Year 9 salvage Totals Initial investment Net present value Present Value of Net Net Cash Flows x Present Value = Cash Flows = $ 0 201,000 < Required A Required B
Exercise 24-19 (Algo) Net present value; internal rate of return; equal cash flows LO P3, P4 Quary Company is considering an investment in machinery with the following information. The company's required rate of return is 12%. (PV of $1, FV of $1, PVA of $1, and FVA of $1) Note: Use appropriate factor(s) from the tables provided. Initial investment Useful life $ 201,000 Materials, labor, and overhead (except depreciation) 9 years Depreciation-Machinery $ 47,000 20,100 Salvage value Expected sales per year $ 20,100 11,000 units Selling, general, and administrative expenses Selling price per unit 7,000 $ 11 a. Compute the investment's net present value. b. Using the answer from part a, is the investment's internal rate of return higher or lower than 12%? Hint: It is not necessary to compute the IRR to answer this question. Complete this question by entering your answers in the tabs below. Required A Required B Compute the investment's net present value. Note: Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals. Round your answers to the nearest whole dollar. Years 1-9 Year 9 salvage Totals Initial investment Net present value Present Value of Net Net Cash Flows x Present Value = Cash Flows = $ 0 201,000 < Required A Required B
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Exercise 24-19 (Algo) Net present value; internal rate of return; equal cash flows LO P3, P4
Quary Company is considering an investment in machinery with the following information. The company's required rate of return is
12%. (PV of $1, FV of $1, PVA of $1, and FVA of $1)
Note: Use appropriate factor(s) from the tables provided.
Initial investment
Useful life
$ 201,000
Materials, labor, and overhead (except depreciation)
9 years Depreciation-Machinery
$ 47,000
20,100
Salvage value
Expected sales per year
$ 20,100
11,000 units
Selling, general, and administrative expenses
Selling price per unit
7,000
$ 11
a. Compute the investment's net present value.
b. Using the answer from part a, is the investment's internal rate of return higher or lower than 12%? Hint: It is not necessary to
compute the IRR to answer this question.
Complete this question by entering your answers in the tabs below.
Required A Required B
Compute the investment's net present value.
Note: Negative net present values should be indicated with a minus sign. Round your present value factor to 4 decimals.
Round your answers to the nearest whole dollar.
Years 1-9
Year 9 salvage
Totals
Initial investment
Net present value
Present Value of Net
Net Cash Flows
x
Present Value
=
Cash Flows
=
$
0
201,000
< Required A
Required B
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