A firm, whose cost of capital is 9 percent, may acquire equipment for $110,783 and rent it to someone for a period of five years. a. If the firm charges $32,270 annually to rent the equipment, what are the net present value and the internal rate of return on the investment? Use a minus sign to enter negative values, if any. Round your answers for the net present value to the nearest dollar and for the internal rate of return to the nearest whole number. b. Should the firm acquire the equipment? c. If the equipment has no estimated residual value, what must be the minimum annual rental charge for the firm to earn the required 9 percent on the investment? Round your answer to the nearest dollar.

A firm, whose cost of capital is 9 percent, may acquire equipment for $110,783 and rent it to someone for a period of five years. a. If the firm charges $32,270 annually to rent the equipment, what are the net present value and the internal rate of return on the investment? Use a minus sign to enter negative values, if any. Round your answers for the net present value to the nearest dollar and for the internal rate of return to the nearest whole number. b. Should the firm acquire the equipment? c. If the equipment has no estimated residual value, what must be the minimum annual rental charge for the firm to earn the required 9 percent on the investment? Round your answer to the nearest dollar.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 5PA: Falkland, Inc., is considering the purchase of a patent that has a cost of $50,000 and an estimated...

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