Copa Corporation is considering the purchase of a new machine costing $150,000. The machine would generate net cash inflows of $43,690 per year for 5 years. At the end of 5 years, the machine would have no salvage value. Copaâs cost of capital is 12 percent. Copa uses straight-line depreciation.
Using a spreadsheet or financial calculator, determine the internal rate of return for the investment.
The proposal's internal rate of return (rounded to the nearest percent) is
A.
12.993 percent.
B.
16.012 percent.
C.
13.998 percent.
D.
14.251 percent.
Copa Corporation is considering the purchase of a new machine costing $169,000. The machine would generate net cash inflows of $43,690 per year for 5 years. At the end of 5 years, the machine would have no salvage value. Copaâs cost of capital is 14 percent. Copa uses straight-line depreciation.
Using a spreadsheet or financial calculator, determine the net present value for the investment.
The proposal's net present value (rounded to the nearest dollar) is:
A.
$(19,009)
B.
$ 18,921
C.
$ 1,070
D.
$(49,450)
Copa Corporation is considering the purchase of a new machine costing $150,000. The machine would generate net cash inflows of $43,690 per year for 5 years. At the end of 5 years, the machine would have no salvage value. Copaâs cost of capital is 12 percent. Copa uses straight-line depreciation.
Using a spreadsheet or financial calculator, determine the internal rate of return for the investment.
The proposal's internal rate of return (rounded to the nearest percent) is
| A. | 12.993 percent. | |
| B. | 16.012 percent. | |
| C. | 13.998 percent. | |
| D. | 14.251 percent. |
Copa Corporation is considering the purchase of a new machine costing $169,000. The machine would generate net cash inflows of $43,690 per year for 5 years. At the end of 5 years, the machine would have no salvage value. Copaâs cost of capital is 14 percent. Copa uses straight-line depreciation.
Using a spreadsheet or financial calculator, determine the net present value for the investment.
The proposal's net present value (rounded to the nearest dollar) is:
| A. | $(19,009) | |
| B. | $ 18,921 | |
| C. | $ 1,070 | |
| D. | $(49,450) |
Related questions
Westmont Publishing is considering the purchase of a used printing press costing $75,200. The printing press would generate a net cash inflow of $31,310 a year for 3 years. At the end of 3 years, the press would have no salvage value. The company's cost of capital is 10 percent. The company uses straight-line depreciation. The present value factors of an annuity of $1.00 for different rates of return are as follows:
| Cost of Capital |
| Period | 8% | 10% | 12% | 14% | 16% |
| 2 | 1.78326 | 1.73554 | 1.69005 | 1.64666 | 1.60523 |
| 3 | 2.57710 | 2.48685 | 2.40183 | 2.32163 | 2.24589 |
| 4 | 3.31213 | 3.16987 | 3.03735 | 2.91371 | 2.79818 |
The investments internal rate of return (rounded to the nearest percent) is
| A. | 14 percent. | |
| B. | 12 percent. | |
| C. | 10 percent. | |
| D. | 16 percent. |
Westmont Publishing is considering the purchase of a used printing press costing $69,700. The printing press would generate a net cash inflow of $31,000 a year for 3 years. At the end of 3 years, the press would have no salvage value. The company's cost of capital is 10 percent. The company uses straight-line depreciation. The present value factors of an annuity of $1.00 for different rates of return are as follows:
| Cost of Capital |
| Period | 8% | 10% | 12% | 14% | 16% |
| 2 | 1.78326 | 1.73554 | 1.69005 | 1.64666 | 1.60523 |
| 3 | 2.57710 | 2.48685 | 2.40183 | 2.32163 | 2.24589 |
| 4 | 3.31213 | 3.16987 | 3.03735 | 2.91371 | 2.79818 |
The investment's net present value is:
| A. | $ 8,891 | |
| B. | $23,300 | |
| C. | $ 5,480 | |
| D. | $ 7,392 |
Wendellâs Donut Shoppe is investigating the purchase of a new$50,100 donut-making machine. The new machine would permit thecompany to reduce the amount of part-time help needed, at a costsavings of $5,900 per year. In addition, the new machine wouldallow the company to produce one new style of donut, resulting inthe sale of 2,600 dozen more donuts each year. The company realizesa contribution margin of $1.60 per dozen donuts sold. The newmachine would have a six-year useful life. |
Required: | |||||||||||||
What would be the total annual cash inflows associated with thenew machine for capital budgeting purposes? | |||||||||||||
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2. | Find the internal rate of return promised by the new machine tothe nearest whole percent. | ||||||||||||||||||||||||||||||||||||
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In addition to the data given previously, assume that themachine will have a $19,000 salvage value at the end of six years.Under these conditions, compute the internal rate of return to thenearest whole percent. (Round your final answer to nearestwhole percentage.) | ||||||||
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