Splish Brothers, Inc. is considering purchasing equipment costing $76000 with a 6-year useful life. The equipment...
Splish Brothers, Inc. is considering purchasing equipment
costing $76000 with a 6-year useful life. The equipment will
provide annual cost savings of $18487 and will be depreciated
straight-line over its useful life with no salvage value. Splish
Brothers requires a 10% rate of return.
| Present Value of an Annuity of 1 | ||||||
| Period | 8% | 9% | 10% | 11% | 12% | 15% |
| 6 | 4.623 | 4.486 | 4.355 | 4.231 | 4.111 | 3.784 |
What is the approximate internal rate of return for this
investment?
9%
10%
11%
12%
Homework Answers
12%
At IRR, Present value of cash inflow = Present value of cash outflow
18487*X = 76000
X = 4.111
Hence, IRR = 12%
Add Answer to:
Splish Brothers, Inc. is considering purchasing equipment
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CullumberCompany is considering two capital investment
proposals. Estimates regarding each project are provided
below:
Project Soup
Project Nuts
Initial investment
$200000
$400000
Annual net income
16000
46000
Net annual cash inflow
60000
97000
Estimated useful life
5 years
6 years
Salvage value
0
0
The company requires a 10% rate of return on all new
investments.
Present Value of an
Annuity of 1
Periods
9%
10%
11%
12%
5
3.89
3.791
3.696
3.605
6
4.486
4.355...
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Multiple Choice Question 114
CullumberCompany is considering two capital investment
proposals. Estimates regarding each project are provided
below:
Project Soup
Project Nuts
Initial investment
$200000
$400000
Annual net income
16000
46000
Net annual cash inflow
60000
97000
Estimated useful life
5 years
6 years
Salvage value
0
0
The company requires a 10% rate of return on all new
investments.
Present Value of an
Annuity of 1
Periods
9%
10%
11%
12%
5
3.89
3.791
3.696
3.605
6
4.486
4.355...
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