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Kingston Corporation is considering a new machine that requires an initial investment of $550,000, including installation costs, and has a useful life of eight years. The expected annual after-tax cash flows for the machine are $89,000 during the first three years, $95,000 during years for through six, and $105,000 during the last two years. (a) Calculate the internal rate of return—IRR (round your answer to two decimal places). (b) Calculate the net present value—NPV—at the following required rates of return (round your answers to two decimal places): (1) 3% (2) 4% (3) 8% (4) 9% (c) Using the IRR and NPV criterion, comment if the projects should be accepted or rejected at the following required rates of return: (1) 3% (2) 4% (3) 8% (4) 9% (d) Plot the NPV profile (NPV on the Y-axis and the required rates of return on the X-axis). State Appropriate Mathematical formula to be used and detailed steps in the solution calculations. Must show work.
You are thinking about investing in a mine that will produce $10,000 worth of ore in the first year. As the ore closest to the surface is removed it will become more difficult to extract the ore. Therefore, the value of the ore that you mine will dec..
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The original Barbie doll was introduced in 1972 and sold for approximately $3.00. In year 2015, a mint-condition doll in its original box would be listed on EBay at approximately $700.00. What average annual rate of return would the seller realize if..
How much dividend income did the investor receive on December 31 from his investment in ABC stock?
Ares, Inc, has purchased a brand new machine to produce its High Flight line of shoes. The machine has an economic life of five years. The depreciation schedule for the machine is straight-line and there is no anticipated salvage value. Assume that t..
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