A machine that costs $6,750 is expected to operate for 9 years. The estimated salvage value at the end of 9 years is $0. The machine is expected to save the company $1,669 per year before taxes and depreciation. The company depreciates its assets on a straight-line basis and has a marginal tax rate of 40 percent. What is the exact internal rate of return on this investment? Use the calculator and Table IV to answer the question. Round your answer to two decimal places.
Homework Answers
Savings before depreciation and taxes = $1,669
Depreciation = Machine cost / useful life
= $6,750 / 9 years
= $750
Profit after tax = (Savings - depreciation) * (1 - tax rate)
= ($1,669 - $750) * (1 - 40%)
= $919 * 0.6
= $551.40
Net operating cash flows = Profit after tax + depreciation
= $551.40 + $750
= $1,301.40
Let i = internal rate of return
n = 9 years
Net operating cash flows × [[ 1 - (1+i)^-n ] / i] = machine cost
$1,301.40 × [1 - (1+i)^-9] / i] = $6,750
[1 - (1+i)^-9] / i] = 5.186721992
i = 12.720806%
Therefore, exact internal rate of return is 12.72%
Add Answer to:
A machine that costs $6,750 is expected to operate for 9 years.
The estimated salvage value...
International Foods Corporation, a U.S.-based food company, is considering expanding its soup-processing operations in Switzerland. The...
International Foods Corporation, a U.S.-based food company, is
considering expanding its soup-processing operations in
Switzerland. The company plans a net investment of $7 million in
the project. The current spot exchange rate is SF5.5 per dollar (SF
= Swiss francs). Net cash flows for the expansion project are
estimated to be SF3 million for 7 years and nothing thereafter.
Based on its analysis of current conditions in Swiss capital
markets, International Foods has determined that the applicable
cost of capital...
The Buffalo Snow Shoe Company is considering manufacturing radial snow shoes, which are more durable and...
The Buffalo Snow Shoe Company is considering manufacturing
radial snow shoes, which are more durable and offer better
traction. Buffalo estimates that the investment in manufacturing
equipment will cost $240,000 and will have a 10-year economic life.
Buffalo will depreciate the equipment on a straight-line basis to a
$0 estimated salvage value over a 10-year period. The estimated
selling price of each pair of shoes will be $50. Buffalo
anticipates that it can sell 5,000 pairs a year at this...
Dooley, Inc., has outstanding $50 million (par value) bonds that pay an annual coupon rate of...
Dooley, Inc., has outstanding $50 million (par value) bonds that
pay an annual coupon rate of interest of 8.5 percent. Par value of
each bond is $1,000. The bonds are scheduled to mature in 17 years.
Because of Dooley’s increased risk, investors now require a 15
percent rate of return on bonds of similar quality with 17 years
remaining until maturity. The bonds are callable at 112 percent of
par at the end of 9 years. Use Table II and...
A company is planning to invest $70,000 (before tax) in a personnel training program. The $70,000...
A company is planning to invest $70,000 (before tax) in a
personnel training program. The $70,000 outlay will be charged off
as an expense by the firm this year (year 0). The returns from the
program in the form of greater productivity and a reduction in
employee turnover are estimated as follows (on an after-tax basis):
Years 1–10: $14,000 per year Years 11–20: $21,000 per year The
company has estimated its cost of capital to be 12 percent. Assume
that...
a: should/should not b: should/shouod not appendix d An investment costs $23,958 and will generate cash...
a: should/should not
b: should/shouod not
appendix d
An investment costs $23,958 and will generate cash flow of $6,000 annually for five years. The firm's cost of capital is 10 percent. Use Appendix D to answer the questions a. What is the investment's Internal rate of return? Round your answer to the nearest whole number Based on the internal rate of return, should the firm make the investment? The investment Select B made b. What is the investment's net present...
a: should/should not b: should/should not c: the same/different An investment costs $17,944 and will generate...
a: should/should not
b: should/should not
c: the same/different
An investment costs $17,944 and will generate cash flow of $4,000 annually for six years. The firm's cost of capital is 10 percent. Use Appendix D to answer the questions. a. What is the investment's internal rate of return? Round your answer to the nearest whole number Based on the internal rate of return, should the firm make the investment? The investment -Select B made. b. What is the investment's net...
King’s Department Store is contemplating the purchase of a new machine at a cost of $18,392....
King’s Department Store is contemplating the purchase of a new
machine at a cost of $18,392. The machine will provide $4,100 per
year in cash flow for six years. King’s has a cost of capital of 13
percent. Use Appendix D for an approximate answer but calculate
your final answer using the financial calculator method.
a. What is the internal rate of return?
(Do not round intermediate calculations. Enter your answer
as a percent rounded to 2 decimal places.)
...
ou buy a new piece of equipment for $28,192, and you receive a cash inflow of...
ou buy a new piece of equipment for $28,192, and you receive a
cash inflow of $4,500 per year for 16 years. Use Appendix D for an
approximate answer but calculate your final answer using the
financial calculator method.
What is the internal rate of return? (Do not round
intermediate calculations. Enter your answer as a percent rounded
to 2 decimal places.)
Internal rate of return _________%
(1+1 Present value of an annuity of $1, PVFA PV A Appendix...
h 9.10) Help Seve & E Mrs. Crawford will receive $7,250 a year for the next...
h 9.10) Help Seve & E Mrs. Crawford will receive $7,250 a year for the next 17 years from her trust. Use Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods If a 9 percent interest rate is applied, what is the current value of the future payments? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Present vakre appendix D Present value of an annuity of...
CENGAGE MINDTAP search trus cour Exam 2 | 128:36 Back to Assignment Attempts 12. Problem 16-03...
CENGAGE MINDTAP search trus cour Exam 2 | 128:36 Back to Assignment Attempts 12. Problem 16-03 eBook Problem 16-03 A stock costs $100 and pays a $6 annual dividend. If you expect to sell the stock after seven years for $120, what is your anticipated return on the investment? Use Appendix Band Appendix D to answer the question. Round your answer to the nearest whole number. We were unable to transcribe this imageStart Mindtop Acer Mindtapenko Appendix B.jpg Appen &...
International Foods Corporation, a U.S.-based food company, is
considering expanding its soup-processing operations in
Switzerland. The company plans a net investment of $7 million in
the project. The current spot exchange rate is SF5.5 per dollar (SF
= Swiss francs). Net cash flows for the expansion project are
estimated to be SF3 million for 7 years and nothing thereafter.
Based on its analysis of current conditions in Swiss capital
markets, International Foods has determined that the applicable
cost of capital...
The Buffalo Snow Shoe Company is considering manufacturing
radial snow shoes, which are more durable and offer better
traction. Buffalo estimates that the investment in manufacturing
equipment will cost $240,000 and will have a 10-year economic life.
Buffalo will depreciate the equipment on a straight-line basis to a
$0 estimated salvage value over a 10-year period. The estimated
selling price of each pair of shoes will be $50. Buffalo
anticipates that it can sell 5,000 pairs a year at this...
Dooley, Inc., has outstanding $50 million (par value) bonds that
pay an annual coupon rate of interest of 8.5 percent. Par value of
each bond is $1,000. The bonds are scheduled to mature in 17 years.
Because of Dooley’s increased risk, investors now require a 15
percent rate of return on bonds of similar quality with 17 years
remaining until maturity. The bonds are callable at 112 percent of
par at the end of 9 years. Use Table II and...
A company is planning to invest $70,000 (before tax) in a
personnel training program. The $70,000 outlay will be charged off
as an expense by the firm this year (year 0). The returns from the
program in the form of greater productivity and a reduction in
employee turnover are estimated as follows (on an after-tax basis):
Years 1–10: $14,000 per year Years 11–20: $21,000 per year The
company has estimated its cost of capital to be 12 percent. Assume
that...
a: should/should not
b: should/shouod not
appendix d
An investment costs $23,958 and will generate cash flow of $6,000 annually for five years. The firm's cost of capital is 10 percent. Use Appendix D to answer the questions a. What is the investment's Internal rate of return? Round your answer to the nearest whole number Based on the internal rate of return, should the firm make the investment? The investment Select B made b. What is the investment's net present...
a: should/should not
b: should/should not
c: the same/different
An investment costs $17,944 and will generate cash flow of $4,000 annually for six years. The firm's cost of capital is 10 percent. Use Appendix D to answer the questions. a. What is the investment's internal rate of return? Round your answer to the nearest whole number Based on the internal rate of return, should the firm make the investment? The investment -Select B made. b. What is the investment's net...
King’s Department Store is contemplating the purchase of a new
machine at a cost of $18,392. The machine will provide $4,100 per
year in cash flow for six years. King’s has a cost of capital of 13
percent. Use Appendix D for an approximate answer but calculate
your final answer using the financial calculator method.
a. What is the internal rate of return?
(Do not round intermediate calculations. Enter your answer
as a percent rounded to 2 decimal places.)
...
ou buy a new piece of equipment for $28,192, and you receive a
cash inflow of $4,500 per year for 16 years. Use Appendix D for an
approximate answer but calculate your final answer using the
financial calculator method.
What is the internal rate of return? (Do not round
intermediate calculations. Enter your answer as a percent rounded
to 2 decimal places.)
Internal rate of return _________%
(1+1 Present value of an annuity of $1, PVFA PV A Appendix...
h 9.10) Help Seve & E Mrs. Crawford will receive $7,250 a year for the next 17 years from her trust. Use Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods If a 9 percent interest rate is applied, what is the current value of the future payments? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Present vakre appendix D Present value of an annuity of...
CENGAGE MINDTAP search trus cour Exam 2 | 128:36 Back to Assignment Attempts 12. Problem 16-03 eBook Problem 16-03 A stock costs $100 and pays a $6 annual dividend. If you expect to sell the stock after seven years for $120, what is your anticipated return on the investment? Use Appendix Band Appendix D to answer the question. Round your answer to the nearest whole number. We were unable to transcribe this imageStart Mindtop Acer Mindtapenko Appendix B.jpg Appen &...
Most questions answered within 3 hours.
-
Explain how taking an SGLT-2 inhibitor, along with taking
insulin leads to ketoacidosis in people who...
asked 5 minutes ago -
Show the truth table of the
gates needed to control the PISO internal FF, has a...
asked 8 minutes ago -
If X ~ N(50; 100); Determine the value of '' k '' for both
situation:
a)...
asked 27 minutes ago -
In paired t-test, what's the difference between using pooled
variance and using the standard deviation of...
asked 28 minutes ago -
What are the major ethical theories, and how do they apply to
the role of a...
asked 28 minutes ago -
''Driving the call for multilateralism in trade at the summit
was Chinese President Xi Jinping, whose...
asked 21 minutes ago -
Present one method for changing health behavior that you think is
particularly effective.
Describe how one...
asked 30 minutes ago -
Is Goldicks negligent conduct committed within the
scope of his employment for Lapp Roofing liable
asked 42 minutes ago -
What are the effects of IMC-based PID controller and
Zeigler-Nicholas parameters on the specifications of a...
asked 47 minutes ago -
1. Explain the tem (10) Key Success Factors in Contemporary
Selling
asked 1 hour ago -
It's absolutely linked, the effectiveness of the CP Coordinator
and the success of the business impact...
asked 1 hour ago -
where does leadership reside in belief theory
asked 1 hour ago