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PLEASE, WRITE THE SOLUTIONS ON PAPER, EXPLAINING THE ENTIRE PROCESS, THE ONLY AND CORRECT SOLUTIONS IS i* = 9.5% pa ---> NPV(9%) = 81.7971 - 80.406 = 1.3911 AND NPV (10%) = 79.6342-80.3869 = -0.7526 ---> i = 9.65% pa A manufacturer is considering investing in a new production line that requires an initial capital investment of £79,000. Once in operation, the production line is expected to generate the following net earnings at the end of the years stated: YEAR 1 2 3 4 EARNINGS £15,500 £17,200 £19,500 £12,700 Furthermore, exactly mid-year during the second year there will be a further one-off maintenance cost amounting to £1,600. Then at the end of the planned 4-year service it is expected that the company will be able to sell the machinery for £41,000. Calculate, to the nearest 0.01%, the annual internal rate of return the manufacturer can expect to earn from this investment.

PLEASE, WRITE THE SOLUTIONS ON PAPER, EXPLAINING THE ENTIRE PROCESS, THE ONLY AND CORRECT SOLUTIONS IS i* = 9.5% pa ---> NPV(9%) = 81.7971 - 80.406 = 1.3911 AND NPV (10%) = 79.6342-80.3869 = -0.7526 ---> i = 9.65% pa A manufacturer is considering investing in a new production line that requires an initial capital investment of £79,000. Once in operation, the production line is expected to generate the following net earnings at the end of the years stated: YEAR 1 2 3 4 EARNINGS £15,500 £17,200 £19,500 £12,700 Furthermore, exactly mid-year during the second year there will be a further one-off maintenance cost amounting to £1,600. Then at the end of the planned 4-year service it is expected that the company will be able to sell the machinery for £41,000. Calculate, to the nearest 0.01%, the annual internal rate of return the manufacturer can expect to earn from this investment.

Essentials Of Investments
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
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PLEASE, WRITE THE SOLUTIONS ON PAPER, EXPLAINING THE ENTIRE PROCESS, THE ONLY AND CORRECT SOLUTIONS IS i* = 9.5% pa ---> NPV(9%) = 81.7971 - 80.406 = 1.3911 AND NPV (10%) = 79.6342-80.3869 = -0.7526 ---> i = 9.65% pa A manufacturer is considering investing in a new production line that requires an initial capital investment of £79,000. Once in operation, the production line is expected to generate the following net earnings at the end of the years stated: YEAR 1 2 3 4 EARNINGS £15,500 £17,200 £19,500 £12,700 Furthermore, exactly mid-year during the second year there will be a further one-off maintenance cost amounting to £1,600. Then at the end of the planned 4-year service it is expected that the company will be able to sell the machinery for £41,000. Calculate, to the nearest 0.01%, the annual internal rate of return the manufacturer can expect to earn from this investment.
Transcribed Image Text:PLEASE, WRITE THE SOLUTIONS ON PAPER, EXPLAINING THE ENTIRE PROCESS, THE ONLY AND CORRECT SOLUTIONS IS i* = 9.5% pa ---> NPV(9%) = 81.7971 - 80.406 = 1.3911 AND NPV (10%) = 79.6342-80.3869 = -0.7526 ---> i = 9.65% pa A manufacturer is considering investing in a new production line that requires an initial capital investment of £79,000. Once in operation, the production line is expected to generate the following net earnings at the end of the years stated: YEAR 1 2 3 4 EARNINGS £15,500 £17,200 £19,500 £12,700 Furthermore, exactly mid-year during the second year there will be a further one-off maintenance cost amounting to £1,600. Then at the end of the planned 4-year service it is expected that the company will be able to sell the machinery for £41,000. Calculate, to the nearest 0.01%, the annual internal rate of return the manufacturer can expect to earn from this investment.
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