Computing internal rate of return-payback period

Reference no: EM13826060

Problem:

Better Health Pty. Ltd. is evaluating whether to buy pieces of medical equipment each of which requires an up-front expenditure of $1.5 million. The projects are expected to produce the following net cash inflows:

Year Equipment A Equipment B

1 $500,000 $2,000,000

2 $1,000,000 $1,000,000

3 $2,000,000 $600,000

What is the internal rate of return for each piece of equipment?
What is the payback period for each machine?
What is the net present value of each machine if the cost of capital is 10 per cent? 5 per cent? 15 per cent?
Should Better Health buy both machines, only one, or none? Explain your answer.

Additional Information:

This question is basically belongs to the Finance as well as it explains about computing internal rate of return, payback period and net present value of two equipments.

Reference no: EM13826060

Questions Cloud

Create a financial portfolio : describe, and explain the financial institution that would be the best fit for you. Be sure to justify your selection by referencing the information collected in your completed template.

Analyze issues surrounding the current use of social media : Analyze the issues surrounding the current use of social media

What will be the frequency of the meetings : What will be the frequency of the meetings? Provide a rationale for your choice. What facilitation skills would you need to ensure each project meeting is productive, considering that you are working with a cross-functional team and team members are ..

According to the MM extension with growth : According to the MM extension with growth, what is Kitto's unlevered value? If the following is true: EBIT: $200,000 rsU: 11%. Debt: $300,000 T: 40%. rd: 8% EBIT retained: 20%

Computing internal rate of return-payback period : Better Health Pty. Ltd. is evaluating whether to buy pieces of medical equipment each of which requires an up-front expenditure of $1.5 million. The projects are expected to produce the following net cash inflows:

What is Glassmakers premerger WACC : Glassmakers has the below characteristics. The premerger debt is $5, the premerger equity is $10. The risk free rate is 6%. The premerger beta is 1.36. The tax rate is 40%. The cost of debt premerger is 11%. The expected market rate of return is 10%...

What is the minimum price or floor price : What is the minimum price (or "floor" price) at which the Neuman's bonds should sell? If the following is true: Years to maturity: 10 Stock price: $30.00. Par value: $1,000.00 Conversion price: $35.00. Annual coupon: 5.00% Straight-debt yield: 8.00%

Computing the number of patients : Rotary Hospital's static nursing labour expense budget for the month of November 2012 was $64,800 (1,200 patients * 1.5 nursing labour hours per patient * $36 per nursing labour hour).

What is the firms weighted average cost of capital : Suppose a firm’s capital structure consists of debt and common equity. The firm has a cost of equity of 14% and a pre-tax cost of debt of 9%. If the target debt/equity ratio is 75%, and the tax rate is 34%, what is the firm’s weighted average cost of..

User Account

All Pages