XYZ Company invests $2,000,000 for a new machine. The new machine will generate an annual income of $450,000 for XYZ. Annual operating costs are $200,000. A maintenance cost of $300,000 will incur every 4 years. The first one is at the end of the 4th year. The useful life of the machine is 20 years, and the salvage value is $500,000. MAŘR of XYZ company is 10%. a- Calculate the IRR for this project. Use linear interpolation to estimate the IRR. Show the steps of your calculation. Is this an acceptable project? b- What is the simple payback period of the project
XYZ Company invests $2,000,000 for a new machine. The new machine will generate an annual income of $450,000 for XYZ. Annual operating costs are $200,000. A maintenance cost of $300,000 will incur every 4 years. The first one is at the end of the 4th year. The useful life of the machine is 20 years, and the salvage value is $500,000. MAŘR of XYZ company is 10%. a- Calculate the IRR for this project. Use linear interpolation to estimate the IRR. Show the steps of your calculation. Is this an acceptable project? b- What is the simple payback period of the project
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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