Assume that a company is considering buying a new piece of equipment for $240,000 that would have a useful life of five years and no salvage value. Theequipment would generate the following estimated annual revenues and expenses:RevenuesLess operating expenses:CommissionsInsuranceDepreciation.MaintenanceNet operating income$ 15,0005,00048,00030,000$ 137,10098,000$ 39,100Click here to view Exhibit 128-1 and Exhibit 128.2. to determine the appropriate discount factor(s) using the tables provided.The internal rate of return for this Investment is closest to The internal rate of return for this investment is closest to:Multiple ChoiceO26%22%28%24%

Note:Since discounting factor tab is not provided, we used standard table for calculation.

Answered: Assume that a company is considering…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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if a company is considering buying a system that costs 450,000 with an estimated 10-year life and a salvage value of 70,000, the estimated operating results with the new machine are, incremental revenue = 180,000, incremental expenses = 123,000 which is made up by, expenses other than depreciation = 85,000, depreciation (straight-line basis) = 38,000, and incremental income = 57,000, and all revenue and expenses other than depreciation use cash, how do I find the annual net cash flow, time of the payback period, return on investment percentage, and the Net present value, discounted at an annual rate of 6% (present value of $1 due in 10 years, discounted at 6%, is 0.558; present value of $1 received annually for 10 years, discounted at 6%, is 7.360)?
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