Cates and Company is considering investing in a new piece of farming equipment that has a cost
Question:
Cates and Company is considering investing in a new piece of farming equipment that has a cost of $65,000. It promises cost savings of $13,000 per year, after taxes, at the end of each of the next 10 years. The owner currently anticipates the farming equipment to have no salvage value at the end of its useful life.
Compute the internal rate of return for this project. In a few sentences, interpret the meaning of your result.
Compute the internal rate of return, assuming that cost savings were to last only 7 years, instead of 10 years, and the farming equipment will have a salvage value of $8,500 at the end of 7 years. In a few sentences, interpret the meaning of your result. Was there a change compared to item (a)? If so, what does this change signify?
Fundamental Accounting Principles
ISBN: 978-0078110870
20th Edition
Authors: John J. Wild, Ken W. Shaw, Barbara Chiappetta