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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please do not give solution in image format thanku
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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