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Raven Company is considering the purchase of a new piece of equipment. The equipment costs $230,000, and will have a salvage value of $10,000
Raven Company is considering the purchase of a new piece of equipment. The equipment costs $230,000, and will have a salvage value of $10,000 after eight years. Using the new piece of equipment will increase Raven's annual cash flows by $50,000. Raven has a hurdle rate of 15%. (The present value annuity factor where interest rate is 15% and 8 years is 4.4873; the present value factor where interest rate is 15% and 8 years is 0.3269) What is the present value of the increase in annual cash flows? 224366 QUESTION 30 Refer to Raven Company. What is the present value of the salvage value? 3269 QUESTION 31 Refer to Raven Company. What is the net present value of the equipment purchase? If your net present value is negative, answer with a-sign in front. Example negative NPV of $1000, would be answered -1,000 2365 QUESTION 32 Refer to Raven Company. Based on financial factors, should Raven purchase the equipment? O No. Raven should not purchase the equipment Yes. Raven should purchase the equipment. QUESTION 33 Refer to Raven Company. Based on the NPV calculations, in what range would the equipment's intemal rate of return be? OIRR is greater than 15%
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