Henrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cot $122,570, including freight and installation. Henrie's estimated the new machine would increase the company's cash inflows, net of expenses, by $34,000 per year. The machine would have a five-year useful life and no salvage value. Click here to view Exhibit 14B-1 and Exhibit 14B-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 12%, 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 $32,330 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%.) 1. Internal rate of return % Net present value Internal rate of return 2. 3. < Prev 7 of 11 Next >
Henrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cot $122,570, including freight and installation. Henrie's estimated the new machine would increase the company's cash inflows, net of expenses, by $34,000 per year. The machine would have a five-year useful life and no salvage value. Click here to view Exhibit 14B-1 and Exhibit 14B-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 12%, 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 $32,330 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%.) 1. Internal rate of return % Net present value Internal rate of return 2. 3. < Prev 7 of 11 Next >
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
Related questions
Question
7
![Henrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost
$122,570, including freight and installation. Henrie's estimated the new machine would increase the company's cash inflows, net of
expenses, by $34,000 per year. The machine would have a five-year useful life and no salvage value.
Click here to view Exhibit 14B-1 and Exhibit 14B-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 12%, 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 $32,330 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%.)
es
1.
Internal rate of return
%
2.
Net present value
3.
Internal rate of return
%
< Prev
7 of 11
Next >
nere to search](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F973c4f96-9776-4ea1-aa31-4c6f579f4cb5%2Faa007abb-bb21-4fc3-81f3-1860660319ee%2Fwe39ct_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Henrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost
$122,570, including freight and installation. Henrie's estimated the new machine would increase the company's cash inflows, net of
expenses, by $34,000 per year. The machine would have a five-year useful life and no salvage value.
Click here to view Exhibit 14B-1 and Exhibit 14B-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 12%, 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 $32,330 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%.)
es
1.
Internal rate of return
%
2.
Net present value
3.
Internal rate of return
%
< Prev
7 of 11
Next >
nere to search
![EXHIBIT 14B-1 PreSent Value of $t; a
Periods
23%
0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 0.826 0.820 0.813
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
15%
16%
17%
18%
19%
20%
21%
22%
24%
25%
0.962 0.952 0.943 0.935 0.926 0.917
0.806 0.800
0.925 0.907 0.890 0.873
0.857
0.842
0.826 0.812
0.797
0.783 0.769
0.756 0,743
0.731
0,718
0.706 0.694 0.683 0.672
0.661
0.650 0.640
3.
0.889 0.864 0.840 0.816
0.794
0.772
0.751
0.731
0.712
0.693 0.675 0.658 0.641
0.624 0.609 0.593 0.579 0.564 0.551
0.537
0.524 0.512
4
0.855 0.823 0.792 0.763
0.735
0.708
0.683 0.659 0.636 0.613 0.592 0.572 0.552 0.534 0.516
0.499
0.482 0.467 0.451
0.437
0.423
0.410
0.822
0.784
0.747
0,713
0.681
0.650 0.621
0.593 0.567
0.543 0.519 0.497
0.476
0.456 0.437
0.419
0.402 0.386 0.370 0.355
0.341
0.328
0.790
0,746 0,705
0.666
0,630 0.596 0.564 0.535
0.507 0.480 0.456 0.432
0.410
0.390 0.370 0.352 0.335 0.319
0.303 0.289
0.275
0.262
7
0.760 0.711
0.665 0.623
0.583 0.547
0.513
0.482 0.452 0.425 0.400 0.376 0.354 0.333
0.314
0.296 0.279
0.263
0.249 0.235 0.222
0.210
0.731
0.677
0.627
0.582 0.540 0.502 0.467 0.434
0.404 0.376 0,351 0.327
0.305 0.285
0.266 0.249 0.233
0.218
0.204 0.191
0.179
0.168
0.703 0.645 0.592 0.544 0.500 0.460 0.424 0.391
0.361 0.333 0.308 0.284
0.263 0.243 0.225 0.209 0.194
0.180
0.167
0.155
0.144
0134
10
0.676 0.614
0.558 0.508
0.463
0.422 0.386 0.352 0.322 0.295 0.270 0.247
0.227
0.208
0.191
0.176
0.162
0.149
0.137
0.126
0.116
0.107
0.650 0.585 0.527 0.475 0.429 0.388 0.350 0.317 0.287 0.261 0.237 0.215
12 0.625
11
0.195
0.178
0.162
0148
0.135
0.123
0.112
0.103
0.094 0.086
0.557 0.497 0,444 0.397 0.356 0.319 0.286 0,257 0.231
0.208 0.187
0.168
0.152
0.137
0124
0.112
0.102
0.092 0.083
0.076 0.069
0.104 0.093 0.084 0.075 0.068 0.061 0.055
0.099 0.088 0.078 0.069 0.062 0.055 0.049 0.044
0.074 0.065 0.057 0.051 0.045 0.040 0.035
13
0,601
0.530 0.469 0.415
0.368 0.326 0.290 0.258 0.229 0.204 0.182
0.163
0.145
0.130
0.116
14
0.577
0.505 0.442
0.388 0.340 0.299 0.263 0.232 0.205 0.181
0.160
0141
0.125
0.11
15
0.555 0.481
0.417
0.362 0.315
0.275 0.239 0.209 0.183
0.160
0.140
0.123
0.108
0.095 0.084
16
0.534 0.458
0.394 0.339 0.292 0.252 0.218. 0.188
0.163
0.141
0.123
0.107
0.093 0.081
0.071
0.062 0.054
0.047
0.042 0.036
0.032 0.028
0.108
0.095 0.081 0.069 0.059 0.051
17
0.513 0.436 0.371
0.317
0.270 0.231
0.198
0.170
0.146
0.125
0.093 0.080 0.069 0.060 0.052 0.045 0.039 0.034 0.030 0.026 0.023
0.044 0.038 0.032 0.028 0.024 0.021
0.037 0.031 0.027 0.023 0.020 0.017
0.031 0.026 0.022 0.019 0.016 0.014
18
0.494 0.416
0.350 0.296 0.250 0.212
0.180
0.153
0.130
0.111
0.018
19
0.475
0.396 0.331
0.277
0.232 0.194
0.164
0.138
0.116
0.098 0.083 0.070 0.060 0.051
0.043
0.014
20
0.456 0.377
0.312
0.258 0.215. 0.178
0.149
0.124
0104
0.087 0.073 0.061 0.051
0.043 0.037
0.012
0.439 0.359 0.294 0.242 0199
0.422 0.342 0.278 0.226 0.184
0.406 0.326 0.262 0.211
0.390 0.310 0.247 0.197
0.375 0.295 0.233
21
0.164
0.135
0.112
0.093 0.077
0.064 0.053 0.044 0.037 0.031
0.026 0.022 0.018 0.015
0.013 0.011
0.009
0.083 0.068 0.056 0.046 0.038 0.032 0.026 0.022 0.018
0.074 0.060 0.049 0.040 0.033 0.027 0.022 0.018 0.015
22
0.150
0.123
0.101
0.015 0.013
0.011
0.009 0.007
0.091
0.012 0.010 0.009 0.007 0.006
0.010 0.008 0.007 0.006 0,005
0.009 0.007 0.006 0.005
23
0.170
0.138
0.112
24
0.158
0.126
0.102
0.082 0.066 0.053 0.043 0.035 0.028 0.023 0.019
0.015 0.013
25
0.184
0.146
0.116
0.092 0.074 0.059 0.047 0.038 0.030 0.024 0.020 0.016 0.013
0.010
0.004
0.084 0.066 0.053 0.042 0.033 0.026 0.021 0.017 0.014
0.009 0.007 0,006 0.0005 0,004 0.003
0.060 0.047 0.037. 0.029 0.023 0.018 0.014 0.011. 0.009 0.007 0.006 0.005 0.004 0.003 0.002
0.090 0.069 0.054 0.042 0.033 0.026 0.020 0.016 0.012 0.010 0.008 0.006 0.005 0.004 0.003 0.002 0.002
0.014 0.011 0.008 0.006 0.005 0.004 0.003 0.002 0.002 0.002
0.044 0.033 0.026 0.020 0,015 0.012 0.009 0.007 0.0050.004 0.003 0.003 0.002 0.002 0.001
26
0.361
0.281 0.220
0.172
0135
0.106
0.011
27
0.347
0.268 0.207
0161
0.125
0.098 0.076
28
0.333 0.255 0.196
0.150
0.116
29
0.321
0.243 0185
0.141
0.107
0.082 0.063 0.048 0.037 0.029 0.022. 0.017
30
0.308 0.231
0174
0.131
0.099 0.075 0.057
40
0.208 0142
0.097 0.067
0.046 0.032 0.022 0.015 0.011
0.008 0.005 0.004 0.003 0.002 0.001 0.001 0.001
0.000 0.000 0.000 0.000 0.000
search
a](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F973c4f96-9776-4ea1-aa31-4c6f579f4cb5%2Faa007abb-bb21-4fc3-81f3-1860660319ee%2Fx2kl9p_processed.jpeg&w=3840&q=75)
Transcribed Image Text:EXHIBIT 14B-1 PreSent Value of $t; a
Periods
23%
0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 0.826 0.820 0.813
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
15%
16%
17%
18%
19%
20%
21%
22%
24%
25%
0.962 0.952 0.943 0.935 0.926 0.917
0.806 0.800
0.925 0.907 0.890 0.873
0.857
0.842
0.826 0.812
0.797
0.783 0.769
0.756 0,743
0.731
0,718
0.706 0.694 0.683 0.672
0.661
0.650 0.640
3.
0.889 0.864 0.840 0.816
0.794
0.772
0.751
0.731
0.712
0.693 0.675 0.658 0.641
0.624 0.609 0.593 0.579 0.564 0.551
0.537
0.524 0.512
4
0.855 0.823 0.792 0.763
0.735
0.708
0.683 0.659 0.636 0.613 0.592 0.572 0.552 0.534 0.516
0.499
0.482 0.467 0.451
0.437
0.423
0.410
0.822
0.784
0.747
0,713
0.681
0.650 0.621
0.593 0.567
0.543 0.519 0.497
0.476
0.456 0.437
0.419
0.402 0.386 0.370 0.355
0.341
0.328
0.790
0,746 0,705
0.666
0,630 0.596 0.564 0.535
0.507 0.480 0.456 0.432
0.410
0.390 0.370 0.352 0.335 0.319
0.303 0.289
0.275
0.262
7
0.760 0.711
0.665 0.623
0.583 0.547
0.513
0.482 0.452 0.425 0.400 0.376 0.354 0.333
0.314
0.296 0.279
0.263
0.249 0.235 0.222
0.210
0.731
0.677
0.627
0.582 0.540 0.502 0.467 0.434
0.404 0.376 0,351 0.327
0.305 0.285
0.266 0.249 0.233
0.218
0.204 0.191
0.179
0.168
0.703 0.645 0.592 0.544 0.500 0.460 0.424 0.391
0.361 0.333 0.308 0.284
0.263 0.243 0.225 0.209 0.194
0.180
0.167
0.155
0.144
0134
10
0.676 0.614
0.558 0.508
0.463
0.422 0.386 0.352 0.322 0.295 0.270 0.247
0.227
0.208
0.191
0.176
0.162
0.149
0.137
0.126
0.116
0.107
0.650 0.585 0.527 0.475 0.429 0.388 0.350 0.317 0.287 0.261 0.237 0.215
12 0.625
11
0.195
0.178
0.162
0148
0.135
0.123
0.112
0.103
0.094 0.086
0.557 0.497 0,444 0.397 0.356 0.319 0.286 0,257 0.231
0.208 0.187
0.168
0.152
0.137
0124
0.112
0.102
0.092 0.083
0.076 0.069
0.104 0.093 0.084 0.075 0.068 0.061 0.055
0.099 0.088 0.078 0.069 0.062 0.055 0.049 0.044
0.074 0.065 0.057 0.051 0.045 0.040 0.035
13
0,601
0.530 0.469 0.415
0.368 0.326 0.290 0.258 0.229 0.204 0.182
0.163
0.145
0.130
0.116
14
0.577
0.505 0.442
0.388 0.340 0.299 0.263 0.232 0.205 0.181
0.160
0141
0.125
0.11
15
0.555 0.481
0.417
0.362 0.315
0.275 0.239 0.209 0.183
0.160
0.140
0.123
0.108
0.095 0.084
16
0.534 0.458
0.394 0.339 0.292 0.252 0.218. 0.188
0.163
0.141
0.123
0.107
0.093 0.081
0.071
0.062 0.054
0.047
0.042 0.036
0.032 0.028
0.108
0.095 0.081 0.069 0.059 0.051
17
0.513 0.436 0.371
0.317
0.270 0.231
0.198
0.170
0.146
0.125
0.093 0.080 0.069 0.060 0.052 0.045 0.039 0.034 0.030 0.026 0.023
0.044 0.038 0.032 0.028 0.024 0.021
0.037 0.031 0.027 0.023 0.020 0.017
0.031 0.026 0.022 0.019 0.016 0.014
18
0.494 0.416
0.350 0.296 0.250 0.212
0.180
0.153
0.130
0.111
0.018
19
0.475
0.396 0.331
0.277
0.232 0.194
0.164
0.138
0.116
0.098 0.083 0.070 0.060 0.051
0.043
0.014
20
0.456 0.377
0.312
0.258 0.215. 0.178
0.149
0.124
0104
0.087 0.073 0.061 0.051
0.043 0.037
0.012
0.439 0.359 0.294 0.242 0199
0.422 0.342 0.278 0.226 0.184
0.406 0.326 0.262 0.211
0.390 0.310 0.247 0.197
0.375 0.295 0.233
21
0.164
0.135
0.112
0.093 0.077
0.064 0.053 0.044 0.037 0.031
0.026 0.022 0.018 0.015
0.013 0.011
0.009
0.083 0.068 0.056 0.046 0.038 0.032 0.026 0.022 0.018
0.074 0.060 0.049 0.040 0.033 0.027 0.022 0.018 0.015
22
0.150
0.123
0.101
0.015 0.013
0.011
0.009 0.007
0.091
0.012 0.010 0.009 0.007 0.006
0.010 0.008 0.007 0.006 0,005
0.009 0.007 0.006 0.005
23
0.170
0.138
0.112
24
0.158
0.126
0.102
0.082 0.066 0.053 0.043 0.035 0.028 0.023 0.019
0.015 0.013
25
0.184
0.146
0.116
0.092 0.074 0.059 0.047 0.038 0.030 0.024 0.020 0.016 0.013
0.010
0.004
0.084 0.066 0.053 0.042 0.033 0.026 0.021 0.017 0.014
0.009 0.007 0,006 0.0005 0,004 0.003
0.060 0.047 0.037. 0.029 0.023 0.018 0.014 0.011. 0.009 0.007 0.006 0.005 0.004 0.003 0.002
0.090 0.069 0.054 0.042 0.033 0.026 0.020 0.016 0.012 0.010 0.008 0.006 0.005 0.004 0.003 0.002 0.002
0.014 0.011 0.008 0.006 0.005 0.004 0.003 0.002 0.002 0.002
0.044 0.033 0.026 0.020 0,015 0.012 0.009 0.007 0.0050.004 0.003 0.003 0.002 0.002 0.001
26
0.361
0.281 0.220
0.172
0135
0.106
0.011
27
0.347
0.268 0.207
0161
0.125
0.098 0.076
28
0.333 0.255 0.196
0.150
0.116
29
0.321
0.243 0185
0.141
0.107
0.082 0.063 0.048 0.037 0.029 0.022. 0.017
30
0.308 0.231
0174
0.131
0.099 0.075 0.057
40
0.208 0142
0.097 0.067
0.046 0.032 0.022 0.015 0.011
0.008 0.005 0.004 0.003 0.002 0.001 0.001 0.001
0.000 0.000 0.000 0.000 0.000
search
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