Question
Merton Manufacturing Company has an opportunity to purchase some technologically advanced equipment that will reduce the companys cash outflow for operating expenses by $1,271,000 per
Merton Manufacturing Company has an opportunity to purchase some technologically advanced equipment that will reduce the companys cash outflow for operating expenses by $1,271,000 per year. The cost of the equipment is $5,520,704.16. Merton expects it to have a 8-year useful life and a zero salvage value. The company has established an investment opportunity hurdle rate of 15 percent and uses the straight-line method for depreciation. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required a. Calculate the internal rate of return of the investment opportunity.
Internal rate of return________________________________________- b. Indicate whether the investment opportunity should be accepted. A- Rejected B- Accepted
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