Chicago Co. is interested in purchasing a machine that would improve its operational efficiency. The cost...

Transcribed Image Text:

Chicago Co. is interested in purchasing a machine that would improve its operational efficiency. The cost is $200,000 with an estimated residual value of $20,000 and a useful life of eight years. Cash inflows are expected to increase by $40,000 a year. The company's minimum rate of return is 10 percent. The present value of $1 for eight years at 10 percent is 0.467, and the present value of an annuity of $1 at 10 percent and eight years is 5.335. 20. The net present value of the project is 21. The project earns a rate of return of ? Chicago Co. is interested in purchasing a machine that would improve its operational efficiency. The cost is $200,000 with an estimated residual value of $20,000 and a useful life of eight years. Cash inflows are expected to increase by $40,000 a year. The company's minimum rate of return is 10 percent. The present value of $1 for eight years at 10 percent is 0.467, and the present value of an annuity of $1 at 10 percent and eight years is 5.335. 20. The net present value of the project is 21. The project earns a rate of return of ?

Answer rating: 100% (QA)

Net Present Value can be computed as Cash inflows present value of an annuity o... View the full answer