Exercise 12-15 (Algo) Internal Rate of Return and Net Present Value (L012-2, L012-3] Henrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $151,410, including freight and installation. Henrie's estimated the new machine would increase the company's cash inflows, net of expenses, by $42,000 per year. The machine would have a five-year useful life and no salvage value. Click here to view Exhibit 128-1 and Exhibit 128-2, to determine the appropriate discount factor(s) using table. Required: 1. What is the machine's internal rate of return? (Round your answer to the nearest whole percentage, i.e. 0.123 should be considered as 12%.) 2. Using a discount rate of 12%, what is the machine's net present value? Interpret your results. 3. Suppose the new machine would increase the company's annual cash inflows, net of expenses, by only $36,930 per year. Under these conditions, what is the internal rate of return? (Round your answer to the nearest whole percentage, i.e. 0.123 should be considered as 12%.) 1. Internal rate of return 2. Net present value
Exercise 12-15 (Algo) Internal Rate of Return and Net Present Value (L012-2, L012-3] Henrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $151,410, including freight and installation. Henrie's estimated the new machine would increase the company's cash inflows, net of expenses, by $42,000 per year. The machine would have a five-year useful life and no salvage value. Click here to view Exhibit 128-1 and Exhibit 128-2, to determine the appropriate discount factor(s) using table. Required: 1. What is the machine's internal rate of return? (Round your answer to the nearest whole percentage, i.e. 0.123 should be considered as 12%.) 2. Using a discount rate of 12%, what is the machine's net present value? Interpret your results. 3. Suppose the new machine would increase the company's annual cash inflows, net of expenses, by only $36,930 per year. Under these conditions, what is the internal rate of return? (Round your answer to the nearest whole percentage, i.e. 0.123 should be considered as 12%.) 1. Internal rate of return 2. Net present value
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![Exercise 12-15 (Algo) Internal Rate of Return and Net Present Value [LO12-2, LO12-3]
Henrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost
$151,410, including freight and installation. Henrie's estimated the new machine would increase the company's cash inflows, net of
expenses, by $42,000 per year. The machine would have a five-year useful life and no salvage value.
Click here to view Exhibit 128-1 and Exhibit 128-2, to determine the appropriate discount factor(s) using table.
Required:
1. What is the machine's internal rate of return? (Round your answer to the nearest whole percentage, i.e. 0.123 should be
considered as 12%.)
2. Using a discount rate of 12%, what is the machine's net present value? Interpret your results.
3. Suppose the new machine would increase the company's annual cash inflows, net of expenses, by only $36,930 per year. Under
these conditions, what is the internal rate of return? (Round your answer to the nearest whole percentage, i.e. 0.123 should be
considered as 12%.)
1. Internal rate of return
2. Net present value
3. Internal rate of return i
%
%](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1c27d751-6426-40a1-8526-59c78b2aed03%2F97cf8e70-f9f6-468a-90d8-45dd242dd43f%2F9n6s7yi_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Exercise 12-15 (Algo) Internal Rate of Return and Net Present Value [LO12-2, LO12-3]
Henrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost
$151,410, including freight and installation. Henrie's estimated the new machine would increase the company's cash inflows, net of
expenses, by $42,000 per year. The machine would have a five-year useful life and no salvage value.
Click here to view Exhibit 128-1 and Exhibit 128-2, to determine the appropriate discount factor(s) using table.
Required:
1. What is the machine's internal rate of return? (Round your answer to the nearest whole percentage, i.e. 0.123 should be
considered as 12%.)
2. Using a discount rate of 12%, what is the machine's net present value? Interpret your results.
3. Suppose the new machine would increase the company's annual cash inflows, net of expenses, by only $36,930 per year. Under
these conditions, what is the internal rate of return? (Round your answer to the nearest whole percentage, i.e. 0.123 should be
considered as 12%.)
1. Internal rate of return
2. Net present value
3. Internal rate of return i
%
%
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