Question

Shillington Theatrical Supply is planning to expand its product line to include stage makeup. The expansion will require the company to purchase special mixing equipment at a cost of $111,510. The equipment will have a useful life of 15 years.

Required
a. If Shillington uses a 16% hurdle rate, what is the minimum annual net cash inflow required to make this project acceptable under the internal rate of return method?
b. If Shillington estimates that the new product line will generate $18,000 in additional annual net cash inflow, is the project acceptable given the company's 16% hurdle rate? Why or why not?



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  • CreatedFebruary 21, 2014
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