Henrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes....
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Henrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $130,400 and it would increase the company's cash inflows by $25,000 per year. The machine would have a 10-year useful life and a salvage value of $20,000. Alternatively, the company could purchase a different machine for $75,000. It would increase the company's cash inflows by $15,000 per year. The machine would have a 9-year useful life and no salvage value. Considering a minimum required rate of return of 7.5%: a. Compute the project profitability index for both projects. b. Compute the internal rate of return for both projects (alternatively, you can compute 2 iterations of the bisection method, considering an initial interval of [0%, 30%]). Henrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $130,400 and it would increase the company's cash inflows by $25,000 per year. The machine would have a 10-year useful life and a salvage value of $20,000. Alternatively, the company could purchase a different machine for $75,000. It would increase the company's cash inflows by $15,000 per year. The machine would have a 9-year useful life and no salvage value. Considering a minimum required rate of return of 7.5%: a. Compute the project profitability index for both projects. b. Compute the internal rate of return for both projects (alternatively, you can compute 2 iterations of the bisection method, considering an initial interval of [0%, 30%]).
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a Project profitability index Present value of cash inflows Initial Investment For the first machine ... View the full answer
Related Book For
Managerial Accounting
ISBN: 9781259275814
11th Canadian Edition
Authors: Ray H Garrison, Alan Webb, Theresa Libby
Posted Date:
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