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A new start up company has contemplated investing $210,000 in new equipment. Their analysis has shown that this new machinery will generate the following cash
| A new start up company has contemplated investing | $210,000 | in new equipment. | ||||
| Their analysis has shown that this new machinery will generate the following cash flows: | ||||||
| Annual | ||||||
| Year | Cashflow | |||||
| 1 | $ 10,000 | |||||
| 2 | $ 15,000 | |||||
| 3 | $ 40,000 | |||||
| 4 | $ 45,000 | |||||
| 5 | $ 55,000 | |||||
| 6 | $ 60,000 | |||||
| 7 | $ 65,000 | |||||
| 8 | $ 70,000 | |||||
| 9 | $ 75,000 | |||||
| 10 | $ 80,000 | |||||
| $ 515,000 | ||||||
| The minimum rate of return that they want to earn is | 14% | |||||
| Based on these projections, please calculate the following for this project: | ||||||
| Q1 | Compute the present value? | |||||
| Q2 | Compute the net present value? | |||||
| Q3 | Compute the estimate for the IRR ? | |||||
| Q4 | Should the company proceed with this investment? |
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Horngrens Financial And Managerial Accounting
Authors: Tracie Miller Nobles, Brenda Mattison, Ella Mae Matsumura
6th Edition
0134486838, 978-0134486833
