What is the NPV of purchasing The Strainer? 2. After reviewing the available information, should Kancherla purchase The Strainer based on NPV? Yes 3. What is the IRR of purchasing The Strainer? 4. After reviewing the available information, should Kancherla purchase The Strainer based on IRR? No 5. If Kancherla increases each year's revenue by $300,000, should The Strainer be purchased based on either NPV or IRR? As part of our effort to accelerate the growth of our campus cleaning business, I formally propose an evaluation of The Strainer, a revolutionary vacuum cleaning device. It should add $1.75 million per year to La Terrasse's revenue at a $250,000 annual operating cost and a tax rate of 40%. Besides the cash flow generated from the Strainer, I believe that I can sell The Strainer in 4 years for at least $2 million. Present Value Tables Periods PV of $1 at 11% PV of Ordinary Annuity of $1 at 11% 1 0.90090 0.90090 2 0.81162 1.71252 3 0.73119 2.44371 4 0.65873 3.10245 5 0.59345 3.69590 The board has decided to proceed with an evaluation of the acquisition of The Strainer. However, purchase is contingent on reaching a required rate of return.

Answer rating: 100% (QA)

Net Present Value NPV is 385966307 based on the provided information A positive NPV indicates tha... View the full answer