Solution-Calculate the internal rate of return for Machine A

Calculate the internal rate of return for Machine A

Assignment Help Accounting Basics

Reference no: EM132563481

Question - Suppose that ABC Ltd is considering purchasing one of three new processing machines. Either machine would make it possible for the company to produce its products more efficiently.

Estimates regarding each machine are provided below:

	Machine A	Machine B	Machine C
Original cost	$79,000	$110,000	$244,000
Estimated life	7 years	8 years	10 years
Salvage value	Nil	Nil	$30,000
Estimated annual cash inflows	$30,000	$60,000	$58,500
Estimated annual cash outflows	$7,000	$35,000	$18,500

Required -

A. If the projects cannot be repeated, which machine should ABC Ltd choose based on the NPV criteria at an 8% cost of capital?

B. If the projects can be repeated, which machine should ABC Ltd choose based on the NPV criteria at an 8% cost of capital?

C. Calculate the internal rate of return for Machine A? [Hint: internal rate of return is the rate which results in a zero NPV using linear interpolation], and discuss 1 drawback of the IRR against the NPV.

Reference no: EM132563481

Questions Cloud

Information governance reference model : Briefly name three components required to successfully conceive a complex set of inter-operable processes and implementable procedures.

What is the fair price of the preferred stock : The preferred stock of Humana Inc. pays an annual dividend of $3.2. What is the fair price of the preferred stock if the required return is 5%

Develop a personal leadership philosophy : Develop and submit a personal leadership philosophy that reflects what you think are characteristics of a good leader. Use the scholarly resources.

Find the price of the bonds based on semiannual analysis : Sara is called in as a financial analyst to appraise the bonds of Humana, Compute the price of the bonds based on semiannual analysis. Show work

Calculate the internal rate of return for Machine A : Suppose that ABC Ltd is considering purchasing one of three new processing machines. Calculate the internal rate of return for Machine A

What amount recognized as loss resulting from the repayment : Therefore had to repay fully such grant to the government. What amount should be recognized as loss resulting from the repayment of the grant in 2022?

What amount recognized in income from government grant : Completed and ready for the intended use on January 01, 2021. What amount should be recognized in 2022 as income from the government grant?

What should be reported as carrying amount of the machine : AAA Company purchased a varnishing machine, What should be reported as carrying amount of the machine and deferred income, respectively, on December 31, 2021.

Description of organization and proposed risks : Brief description of the organization and proposed risks. Rationale if the same ERM models and/or techniques can be used in the organization to mitigate risks

User Account

All Pages

Calculate the internal rate of return for Machine A

Reference no: EM132563481

Reference no: EM132563481

Questions Cloud

Reviews

Write a Review

Accounting Basics Questions & Answers

How much control does fed have over this longer real rate

Coures:- fundamental accounting principles

Accounting problems

Theory of interest - term structure of interest rates

Write a report on internal controls

Prepare the bank reconciliation for company

Cost-benefit analysis

Theory of interest

Liquidity and profitability

What is the expected risk premium on the portfolio

Simple interest and compound interest

Capm and venture capital

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT