Walton Manufacturing Company has an opportunity to purchase some technologically advanced equipment that will reduce the company's cash outflow for operating expenses by $1,285,000 per year. The cost of the equipment is $5,704,393.85. Walton expects it to have a 12-year useful life and a zero salvage value. The company has established an investment opportunity hurdle rate of 19 percent and uses the straight-line method for depreciation. (PV of $1 and PVA of $1) Note: Use appropriate factor(s) from the tables provided. Required a. Calculate the internal rate of return of the investment opportunity. Note: Do not round intermediate calculations. b. Indicate whether the investment opportunity should be accepted. a. Internal rate of return b. Should the investment opportunity be accepted? % I
Walton Manufacturing Company has an opportunity to purchase some technologically advanced equipment that will reduce the company's cash outflow for operating expenses by $1,285,000 per year. The cost of the equipment is $5,704,393.85. Walton expects it to have a 12-year useful life and a zero salvage value. The company has established an investment opportunity hurdle rate of 19 percent and uses the straight-line method for depreciation. (PV of $1 and PVA of $1) Note: Use appropriate factor(s) from the tables provided. Required a. Calculate the internal rate of return of the investment opportunity. Note: Do not round intermediate calculations. b. Indicate whether the investment opportunity should be accepted. a. Internal rate of return b. Should the investment opportunity be accepted? % I
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Walton Manufacturing Company has an opportunity to purchase some technologically advanced equipment that will reduce the
company's cash outflow for operating expenses by $1,285,000 per year. The cost of the equipment is $5,704,393.85. Walton expects it
to have a 12-year useful life and a zero salvage value. The company has established an investment opportunity hurdle rate of 19
percent and uses the straight-line method for depreciation. (PV of $1 and PVA of $1)
Note: Use appropriate factor(s) from the tables provided.
Required
a. Calculate the internal rate of return of the investment opportunity.
Note: Do not round intermediate calculations.
b. Indicate whether the investment opportunity should be accepted.
a. Internal rate of return
b. Should the investment opportunity be accepted?
%
I
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