Question
Jupiter Inc. wants to expand its operations by manufacturing a new product line . New equipment will cost $ 225,000 Incremental sales are estimated at
Jupiter Inc. wants to expand its operations by manufacturing a new product line . New equipment will cost $ 225,000 Incremental sales are estimated at $ 150,000 per year for six years . Variable costs of producing the new product line are 52 % of sales and incremental annual fixed costs are $ 25,000 . The equipment can be salvaged after six years for 16 % of its original cost . The company's required rate of return for new projects is 18 % . Ignore income taxes . What is the internal rate of return of this investment ? Select one : a. 18.00 % b . 13.62 % 12.75 % d . 10.00 % e . 6.86 %
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