Question
Please show using step by step mathematics. Henries Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine
Please show using step by step mathematics.
Henries Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $170,595, including freight and installation. Henries estimated the new machine would increase the companys cash inflows, net of expenses, by $45,000 per year. The machine would have a five-year useful life and no salvage value.
Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using table.
Required:
1. What is the machines internal rate of return? (Round your answer to whole decimal place i.e. 0.123 should be considered as 12%.)
2. Using a discount rate of 10%, what is the machines net present value? Interpret your results.
3. Suppose the new machine would increase the companys annual cash inflows, net of expenses, by only $40,500 per year. Under these conditions, what is the internal rate of return? (Round your answer to whole decimal place i.e. 0.123 should be considered as 12%.)
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