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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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The local supermarket is considering investing in self-checkout kiosks for its customers. The self-checkout kiosks will cost $45,500 and have no residual value. Management expects the equipment to result in net cash savings over three years as customers grow accustomed to using the new technology: $14,000 the first year; $21,000 the second year; $27,000 the third year. The company has already determined that the net present value of the investment at a 14% discount rate is $1,152. What is the approximate internal rate of return (IRR) of the kiosk investment? (Click the icon to view the present value of an annuity table.) (Click the icon to view the future value of an annuity table.) Since the NPV at 14% is , the IRR must be (Click the icon to view the present value table.) (Click the icon to view the future value table.) ▼ 14%.
Transcribed Image Text:The local supermarket is considering investing in self-checkout kiosks for its customers. The self-checkout kiosks will cost $45,500 and have no residual value. Management expects the equipment to result in net cash savings over three years as customers grow accustomed to using the new technology: $14,000 the first year; $21,000 the second year; $27,000 the third year. The company has already determined that the net present value of the investment at a 14% discount rate is $1,152. What is the approximate internal rate of return (IRR) of the kiosk investment? (Click the icon to view the present value of an annuity table.) (Click the icon to view the future value of an annuity table.) Since the NPV at 14% is , the IRR must be (Click the icon to view the present value table.) (Click the icon to view the future value table.) ▼ 14%.
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