Finch Manufacturing Company has an opportunity to purchase some technologically advanced equipment that will reduce the company's cash outflow for operating expenses by $1,273,000 per year. The cost of the equipment is $5,131,420.99. Finch expects it to have a 9-year useful life and a zero salvage value. The company has established an investment opportunity hurdle rate of 19 percent and uses the straight-line method for depreciation. (PV of $1 and PVA of $1) Note: Use appropriate factor(s) from the tables provided. Required a. Calculate the internal rate of return of the investment opportunity. Note: Do not round intermediate calculations. b. Indicate whether the investment opportunity should be accepted. a. Internal rate of return b. Should the investment opportunity be accepted? %

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
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Finch Manufacturing Company has an opportunity to purchase some technologically advanced equipment that will reduce the
company's cash outflow for operating expenses by $1,273,000 per year. The cost of the equipment is $5,131,420.99. Finch expects it to
have a 9-year useful life and a zero salvage value. The company has established an investment opportunity hurdle rate of 19 percent
and uses the straight-line method for depreciation. (PV of $1 and PVA of $1)
Note: Use appropriate factor(s) from the tables provided.
Required
a. Calculate the internal rate of return of the investment opportunity.
Note: Do not round intermediate calculations.
b. Indicate whether the investment opportunity should be accepted.
a. Internal rate of return
b. Should the investment opportunity be accepted?
%
Transcribed Image Text:Finch Manufacturing Company has an opportunity to purchase some technologically advanced equipment that will reduce the company's cash outflow for operating expenses by $1,273,000 per year. The cost of the equipment is $5,131,420.99. Finch expects it to have a 9-year useful life and a zero salvage value. The company has established an investment opportunity hurdle rate of 19 percent and uses the straight-line method for depreciation. (PV of $1 and PVA of $1) Note: Use appropriate factor(s) from the tables provided. Required a. Calculate the internal rate of return of the investment opportunity. Note: Do not round intermediate calculations. b. Indicate whether the investment opportunity should be accepted. a. Internal rate of return b. Should the investment opportunity be accepted? %
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