Question
Assume that a company is considering buying a new piece of equipment for $240,000 that would have a useful life of five years and no
Assume that a company is considering buying a new piece of equipment for $240,000 that would have a useful life of five years and no salvage value. The equipment would generate the following estimated annual revenues and expenses: Revenues $ 108,600 Less operating expenses: Commissions $ 15,000 Insurance 5,000 Depreciation 48,000 Maintenance 30,000 98,000 Net operating income $ 10,600 Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using the tables provided. The internal rate of return for this investment is closest to: Multiple Choice
9%
5%
11%
7%
Assume the following information for a capital budgeting proposal with a five-year time horizon: Initial investment: Cost of equipment (zero salvage value) $ 563,000 Annual revenues and costs: Sales revenues $ 300,000 Variable expenses $ 130,000 Depreciation expense $ 50,000 Fixed out-of-pocket costs $ 40,000 This proposals simple rate of return is closest to:
Multiple Choice
23%
14%
16%
24%
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