Compute machine's NPV, IRR, required rate of return
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1a. Minden Company's required rate of return is 15%. The company can purchase a new machine at a cost of $40,350. The new machine would generate cash inflows of $15,000 per year and have a four-year life with no salvage value. Compute the machine's net present value. (Negative amount should be indicated by a minus sign. Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount. Omit the "$" sign in your response.)
Net present value $
1b. Is the machine an acceptable investment?
Yes
No
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2. Leven Products, Inc., is investigating the purchase of a new grinding machine that has a projected life of 15 years. It is estimated that the machine will save $20,000 per year in cash operating costs. What is the machine's internal rate of return if it costs $111,500 new? (Round discount factor(s) to 3 decimal places and final answer to the closest interest rate. Omit the "%" sign in your response.)
Internal rate of return %
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3a. Sunset Press has just purchased a new trimming machine that cost $14,125. The machine is expected to save $2,500 per year in cash operating costs and to have a 10-year life. Compute the machine's internal rate of return. (Round discount factor(s) to 3 decimal places and final answer to the closest interest rate. Omit the "%" sign in your response.)
Internal rate of return %
3b. If the company's required rate of return is 16%, did it make a wise investment?
Yes
No
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