The company is considering a project involving the purchase of new equipment. Cost of equipment needed $420,000 Working capital needed $45,000 Overhaul of equipment in four years $35,000 Salvage value of the equipment in five years is $35,000 Annual revenues and costs: Sales revenues $385,000 Cost of goods sold $210,000 Out-of- pocket operating costs $65,000 Discount rate is 11 %. What is the net present value of the project? The internal rate of return is between what two whole discount rates?

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
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The company is considering a project involving the purchase of new equipment. Cost of
equipment needed $420,000 Working capital needed $45,000 Overhaul of equipment
in four years $35,000 Salvage value of the equipment in five years is $35,000 Annual
revenues and costs: Sales revenues $385,000 Cost of goods sold $210,000 Out-of-
pocket operating costs $65,000 Discount rate is 11 % . What is the net present value of
the project? The internal rate of return is between what two whole discount rates?
Transcribed Image Text:The company is considering a project involving the purchase of new equipment. Cost of equipment needed $420,000 Working capital needed $45,000 Overhaul of equipment in four years $35,000 Salvage value of the equipment in five years is $35,000 Annual revenues and costs: Sales revenues $385,000 Cost of goods sold $210,000 Out-of- pocket operating costs $65,000 Discount rate is 11 % . What is the net present value of the project? The internal rate of return is between what two whole discount rates?
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