Thornton Manufacturing Company has an opportunity to purchase some technologically advanced equipment that will reduce the company's cash outflow for operating expenses by $1, 278,000 per year. The cost of the equipment is S 7,661,925.67. Thornton expects it to have a 9 - year useful life and a zero salvage value. The company has established an investment opportunity hurdle rate of 15 percent and uses the straight - line method for depreciation. (PV of S1 and PVA of S 1) (Use appropriate factor (s) from the tables provided.) Required Calculate the internal rate of return of the investment opportunity. (Do not round intermediate calculations.) Indicate whether the investment opportunity should be accepted.

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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Thornton Manufacturing Company has an opportunity to purchase some
technologically advanced equipment that will reduce the company's cash outflow for
operating expenses by $1, 278,000 per year. The cost of the equipment is S
7,661,925.67. Thornton expects it to have a 9 - year useful life and a zero salvage
value. The company has established an investment opportunity hurdle rate of 15
percent and uses the straight - line method for depreciation. (PV of S1 and PVA of S
1) (Use appropriate factor (s) from the tables provided.) Required Calculate the
internal rate of return of the investment opportunity. (Do not round intermediate
calculations.) Indicate whether the investment opportunity should be accepted.                      

a. Internal rate of return
b. Should the investment opportunity be accepted?
16 %
Rejected
Y
Transcribed Image Text:a. Internal rate of return b. Should the investment opportunity be accepted? 16 % Rejected Y
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