Explore BrainMass
Share

Compute machine's NPV, IRR, required rate of return

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

See attached file for proper format.

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

check my workeBook Links (2)references

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 %

check my workeBook Links (2)references

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

© BrainMass Inc. brainmass.com October 25, 2018, 5:17 am ad1c9bdddf
https://brainmass.com/business/internal-rate-of-return/compute-machines-npv-irr-required-rate-return-413784

Attachments

Solution Summary

The expert computes machine's NPV, IRR and required rate of return is examined.

$2.19
See Also This Related BrainMass Solution

Payback, Net Present Value, and Internal Rate of Return Methods

Nucore Company is thinking of purchasing a new candy-wrapping machine at a cost of $370,000. The machine should save the company approximately $70,000 in operating costs per year over its estimated useful life of 10 years. The salvage value at the end of 10 years is expected to be $15,000. (Ignore income tax effects.)

Required:

1. What is the machine's payback period?

2. Compute the net present value of the machine if the cost of capital is 12%.

3. What is the expected internal rate of return for this machine?

View Full Posting Details