Quary Company is considering an investment in machinery with the following information. The company's required rate of return is 2%. (PV of $1. EV of $1. PVA of $1. and EVA of $1) Note: Use appropriate factor(s) from the tables provided. Initial investment Useful life Salvage value Expected sales per year $ 200,000 Materials, labor, and overhead (except depreciation) 9 years Depreciation-Machinery $ 20,000 Selling, general, and administrative expenses 10,000 units Selling price per unit Complete this quest $ 45,000 20,000 5,000 $ 10 a. Compute the investment's net present value. b. Using the answer from part a, is the investment's internal rate of return higher or lower than 12%? Hint: It is not necessary to compute the IRR to answer this question.
Quary Company is considering an investment in machinery with the following information. The company's required rate of return is 2%. (PV of $1. EV of $1. PVA of $1. and EVA of $1) Note: Use appropriate factor(s) from the tables provided. Initial investment Useful life Salvage value Expected sales per year $ 200,000 Materials, labor, and overhead (except depreciation) 9 years Depreciation-Machinery $ 20,000 Selling, general, and administrative expenses 10,000 units Selling price per unit Complete this quest $ 45,000 20,000 5,000 $ 10 a. Compute the investment's net present value. b. Using the answer from part a, is the investment's internal rate of return higher or lower than 12%? Hint: It is not necessary to compute the IRR to answer this question.
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
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Transcribed Image Text:Quary Company is considering an investment in machinery with the following information. The company's required rate of return is
12%. (PV of $1, FV of $1. PVA of $1, and FVA of $1)
Note: Use appropriate factor(s) from the tables provided.
Initial investment
Useful life
Salvage value
Expected sales per year
$ 200,000
$ 20,000
10,000 units
Materials, labor, and overhead (except depreciation)
9 years Depreciation-Machinery
Selling, general, and administrative expenses
Selling price per unit
$ 45,000
20,000
5,000
$ 10
a. Compute the investment's net present value.
b. Using the answer from part a, is the investment's internal rate of return higher or lower than 12%? Hint: It is not necessary to
compute the IRR to answer this question.
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