Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Oriole Corporation is involved in the business of injection molding of plastics. It is considering the purchase of a new computer- aided design and manufacturing
Oriole Corporation is involved in the business of injection molding of plastics. It is considering the purchase of a new computer- aided design and manufacturing machine for $424,000. The company believes that with this new machine it will improve productivity and increase quality, resulting in an increase in net annual cash flows of $97,354 for the next 6 years. Management requires a 9% rate of return on all new investments. Click here to view PV table. Calculate the internal rate of return on this new machine. (Round answer to 0 decimal places, e.g. 13%. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Internal rate of return % Should the investment be accepted? The investment be accepted. Carla Vista Corp. is considering purchasing one of two new diagnostic machines. Either machine would make it possible for the company to bid on jobs that it currently isn't equipped to do. Estimates regarding each machine are provided here. Machine A Machine B Original cost $78,000 $184,000 Estimated life 8 years 8 years Salvage value 0 0 Estimated annual cash inflows $19,800 $40,300 Estimated annual cash outflows $4,820 $10,160 Click here to view PV table. Calculate the net present value and profitability index of each machine. Assume a 9% discount rate. (If the net present value is negative, use either a negative sign preceding the number eg - 45 or parentheses eg (45). Round answer for present value to O decimal places, e-g. 125 and profitability index to 2 decimal places, eg. 10.50. For calculation purposes, use 5 decimal places as displayed in the factor table provided) Machine A Machine B Net present value Profitability index Which machine should be purchased? should be purchased
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started