Question
Cloud Corp. is considering the purchase of a new piece of equipment. The equipment costs $30,080, and will have a salvage value of $4,080 after
Cloud Corp. is considering the purchase of a new piece of equipment. The equipment costs $30,080, and will have a salvage value of $4,080 after nine years. Using the new piece of equipment will increase Clouds annual cash flows by $6,080. Cloud has a hurdle rate of 14%. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) (Use appropriate factor from the PV tables.) a. What is the net present value? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculation. Round your answer to the nearest dollar amount.)
b. What would the net present value be with a 25% hurdle rate? (Do not round intermediate calculation. Round your answer to the nearest dollar amount. Negative amounts should be indicated by a minus sign.)
c. Based on the NPV calculations, what would be the equipment's internal rate of return? (Round your answer to 2 decimal places.)
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