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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Question
Use two decimals for the below question
![Cheyenne Corporation is evaluating a
proposal to acquire a new equipment. The
equipment would require an investment of
$417,860.00, including freight and installation
cost of $20,000.00. It expected to have a 10-
year life with no salvage value at the end of its
life.
It has been estimated that the new
equipment would increase the company's
cash inflows, net of expenses and income
taxes by $68,000.00
The company is subject to the 32% income tax
rate. Its cost of capital is 8%.
The equipment's internal rate of return (IRR) is](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb19e89e9-afe4-4af1-b02d-e2b1649325ac%2F1ed3a015-c351-44d1-86d8-0c399334a7b9%2Fizbiah_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Cheyenne Corporation is evaluating a
proposal to acquire a new equipment. The
equipment would require an investment of
$417,860.00, including freight and installation
cost of $20,000.00. It expected to have a 10-
year life with no salvage value at the end of its
life.
It has been estimated that the new
equipment would increase the company's
cash inflows, net of expenses and income
taxes by $68,000.00
The company is subject to the 32% income tax
rate. Its cost of capital is 8%.
The equipment's internal rate of return (IRR) is
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