Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Quality Tools, Inc. needs to purchase a new machine costing $2.08 million. Management is estimating the machine will generate cash inflows of
$396,000 for two years and $300,000 for the following seven years. If management requires a minimum 8 percent rate of return, should the firm
purchase this particular machine? Why or why not?
a) no; because the IRR is .68 percent
b) no; because the IRR is 7.57 percent
c) The answer cannot be determined as there are multiple IRRs
d) yes; because the IRR is 10.38 percent
e) yes; because the IRR is 8.47 percent
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Transcribed Image Text:Quality Tools, Inc. needs to purchase a new machine costing $2.08 million. Management is estimating the machine will generate cash inflows of $396,000 for two years and $300,000 for the following seven years. If management requires a minimum 8 percent rate of return, should the firm purchase this particular machine? Why or why not? a) no; because the IRR is .68 percent b) no; because the IRR is 7.57 percent c) The answer cannot be determined as there are multiple IRRs d) yes; because the IRR is 10.38 percent e) yes; because the IRR is 8.47 percent
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