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Latin Cuisine is considering the purchase of new food processing technology, which would cost $1,800,000 and would generate $300,000 in annual cost savings. No salvage is expected on the technology at the end of its 10-year life. The firm's cost of capital and discount rate are both 10 percent. a. Calculate the internal rate of return for the project. Note: Round percentage to one decimal point (i.e. round 4.555% to 4.6%). Answer NOT 10.5 % b. Does the IRR indicate the project is acceptable? Answer +Yes

Latin Cuisine is considering the purchase of new food processing technology, which would cost $1,800,000 and would generate $300,000 in annual cost savings. No salvage is expected on the technology at the end of its 10-year life. The firm's cost of capital and discount rate are both 10 percent. a. Calculate the internal rate of return for the project. Note: Round percentage to one decimal point (i.e. round 4.555% to 4.6%). Answer NOT 10.5 % b. Does the IRR indicate the project is acceptable? Answer +Yes

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Latin Cuisine is considering the purchase of new food processing technology, which would cost $1,800,000 and would generate $300,000 in annual cost savings. No salvage is expected on the technology at the end of its 10-year life. The firm's cost of capital and discount rate are both 10 percent. a. Calculate the internal rate of return for the project. Note: Round percentage to one decimal point (i.e. round 4.555% to 4.6%). Answer NOT 10.5 % b. Does the IRR indicate the project is acceptable? Answer +Yes
Transcribed Image Text:Latin Cuisine is considering the purchase of new food processing technology, which would cost $1,800,000 and would generate $300,000 in annual cost savings. No salvage is expected on the technology at the end of its 10-year life. The firm's cost of capital and discount rate are both 10 percent. a. Calculate the internal rate of return for the project. Note: Round percentage to one decimal point (i.e. round 4.555% to 4.6%). Answer NOT 10.5 % b. Does the IRR indicate the project is acceptable? Answer +Yes
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