Question
7. Garrett Boone, Concord Enterprises vice president of operations, needs to replace an automatic lathe on the production line. The model he is considering has
7. Garrett Boone, Concord Enterprises vice president of operations, needs to replace an automatic lathe on the production line. The model he is considering has a sales price of $440,580 and will last for 15 years. It will have no salvage value at the end of its useful life. Garrett estimates the new lathe will reduce raw materials scrap by $45,000 per year. He also believes the lathe will reduce energy costs by $3,000 per year. If he purchases the new lathe, he will be able to sell the old lathe for $3,400. Click here to view the factor table. (a) Calculate the lathes internal rate of return. (Round answer to 0 decimal places, e.g. 25%.)
Internal rate of return | enter the internal rate of return in percentages rounded to 0 decimal places | % |
(b) If Concord Enterprises uses a 5% hurdle rate, should Garrett purchase the lathe? select an option Yes or No (c) Without doing any calculations, what do you know about the lathes net present value? Net present value will be equal to $0less than $0greater than $0.
. Riverbeds Accounting Museum is exploring the purchase of a new building with a useful life of 15 years to use as its main gallery space. The building will cost $1,098,000. Once it has been purchased, the museum will terminate its current lease, which costs $65,700 per year. The new gallery will allow the museum to display more of its permanent collection, as well as to showcase traveling exhibits. The increased exhibit space, along with the new buildings location, is expected to increase admissions revenue by $25,800 per year. Calculate the payback period for the proposed investment in the building. Assume that all cash flows occur evenly throughout the year.
Payback period | enter the payback period in years years |
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