9 Henrie's Drapery Service is Investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $170,595, including freight and Installation. Henrie's estimated the new machine would increase the company's cash Inflows, net of expenses, by $45,000 per year. The machine would have a five-year useful life and no salvage value. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table. Required: 1. What is the machine's Internal rate of return? (Round your answer to the nearest whole percentage. I.e. 0.123 should be considered as 12%.) 2. Using a discount rate of 10%, what is the machine's net present value? Interpret your results. 3. Suppose the new machine would increase the company's annual cash inflows, net of expenses. by only $40,500 per year. Under these conditions, what is the Internal rate of return? (Round your answer to the nearest whole percentage, I.e. 0.123 should be considered as 12%.) 1. Internal rate of return 2. Net present value 3. Internal rate of return 96 96
9 Henrie's Drapery Service is Investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $170,595, including freight and Installation. Henrie's estimated the new machine would increase the company's cash Inflows, net of expenses, by $45,000 per year. The machine would have a five-year useful life and no salvage value. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using table. Required: 1. What is the machine's Internal rate of return? (Round your answer to the nearest whole percentage. I.e. 0.123 should be considered as 12%.) 2. Using a discount rate of 10%, what is the machine's net present value? Interpret your results. 3. Suppose the new machine would increase the company's annual cash inflows, net of expenses. by only $40,500 per year. Under these conditions, what is the Internal rate of return? (Round your answer to the nearest whole percentage, I.e. 0.123 should be considered as 12%.) 1. Internal rate of return 2. Net present value 3. Internal rate of return 96 96
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 12P
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