Vino Winery is considering the purchase of a state-of-the-art bottling machine. The new machine will cost $20,790 and will have a useful life of 4 years. The new machine will provide net cash savings of $6000 per year. What is the internal rate of return (IRR) for the new bottling machine?
Vino Winery is considering the purchase of a state-of-the-art bottling machine. The new machine will cost $20,790 and will have a useful life of 4 years. The new machine will provide net cash savings of $6000 per year. What is the internal rate of return (IRR) for the new bottling machine?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Vino Winery is considering the purchase of a state-of-the-art bottling machine. The new machine will cost $20,790 and will have a useful life of 4 years. The new machine will provide net cash savings of $6000 per year. What is the internal rate of return (IRR) for the new bottling machine?
Present Value of $1
Present Value of Annuity of $1
Present Value of $1
| Periods | 6% | 8% | 10% | 12% | 14% |
| 3 | 0.840 | 0.794 | 0.751 | 0.712 | 0.675 |
| 4 | 0.792 | 0.735 | 0.683 | 0.636 | 0.592 |
| 5 | 0.747 | 0.681 | 0.621 | 0.567 | 0.519 |
| 6 | 0.705 | 0.630 | 0.564 | 0.507 | 0.456 |
| 7 | 0.665 | 0.583 | 0.513 | 0.452 | 0.400 |
| 8 | 0.627 | 0.540 | 0.467 | 0.404 | 0.351 |
| 9 | 0.592 | 0.500 | 0.424 | 0.361 | 0.308 |
| 10 | 0.558 | 0.463 | 0.386 | 0.322 | 0.270 |
| Periods | 6% | 8% | 10% | 12% | 14% |
| 3 | 2.673 | 2.577 | 2.487 | 2.402 | 2.322 |
| 4 | 3.465 | 3.312 | 3.170 | 3.037 | 2.914 |
| 5 | 4.212 | 3.993 | 3.791 | 3.605 | 3.433 |
| 6 | 4.917 | 4.623 | 4.355 | 4.111 | 3.889 |
| 7 | 5.582 | 5.206 | 4.868 | 4.564 | 4.288 |
| 8 | 6.210 | 5.747 | 5.335 | 4.968 | 4.639 |
| 9 | 6.802 | 6.247 | 5.759 | 5.328 | 4.946 |
| 10 | 7.360 | 6.710 | 6.145 | 5.650 | 5.216 |
|
12%
|
||
|
6%
|
||
|
8%
|
||
|
10%
|
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