# Question

Consider each case below independently. Ignore income taxes.

1. Slade 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. Is the machine an acceptable investment? Explain.

2. Western Products Inc. is investigating purchasing 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 IRR if it costs $111,500 new?

3. 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 IRR. If the company’s required rate of return is 16%, did it make a wise investment? Explain.

1. Slade 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. Is the machine an acceptable investment? Explain.

2. Western Products Inc. is investigating purchasing 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 IRR if it costs $111,500 new?

3. 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 IRR. If the company’s required rate of return is 16%, did it make a wise investment? Explain.

## Answer to relevant Questions

Over the Rainbow Company has $300,000 to invest. The company is trying to decide between two alternative uses of the funds. The alternatives are as follows: The working capital needed for Project B will be released for ...Information on four investment projects being investigated by Clenning Company is as follows: Since the company’s required rate of return is 10%, a 10% discount rate has been used in the present value computations above. ...Brinsley Transport wants to upgrade its fleet of highway transport trucks. The new trucks that the company wants to acquire can be either purchased or leased from the manufacturer. The company has made the following ...Information on three potential projects is given below: Required: 1. Compute the project profitability index for each project. 2. Rank the projects in terms of preference. The Hub Store at a university in eastern Canada is considering purchasing a self-serve check- out machine similar to those used in many grocery stores and other retail outlets. Currently the university pays part-time wages ...Post your question

0