The Wild Side Bowling Alley is planning to invest in pinball machines and pool tables for use

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The Wild Side Bowling Alley is planning to invest in pinball machines and pool tables for use by its patrons. The equipment will cost \(\$ 3,896\) to acquire and will have an estimated service life of seven years with a \(\$ 100\) residual value. Based on estimates by the owner, the tables and games will generate approximately \(\$ 800\) a year of cash inflow after all expenses have been met. Compute the internal rate of return promised by the table and games. Assume that the owner will not invest in the equipment unless it has a \(12 \%\) internal rate of return. Compute the amount of annual cash inflows that would be required on the initial investment to obtain this rate of return.

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Managerial Accounting Information For Decisions

ISBN: 9780324222432

4th Edition

Authors: Thomas L. Albright , Robert W. Ingram, John S. Hill

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