Question

**Exercise 25-05**

Bruno Corporation is involved in the business of injection
molding of plastics. It is considering the purchase of a new
computer-aided design and manufacturing machine for $441,000. The
company believes that with this new machine it will improve
productivity and increase quality, resulting in an increase in net
annual cash flows of $116,529 for the next 6 years. Management
requires a 10% rate of return on all new investments.

Click here to view the factor table.

Calculate the internal rate of return on this new machine.
*(Round answer to 0 decimal places, e.g. 13%. For
calculation purposes, use 5 decimal places as displayed in the
factor table provided.)*

Internal rate of return | enter the internal rate of return in percentages rounded to 0 decimal places % |

Should the investment be accepted?

The investment select an option
shouldshould not be accepted. |

Answer #1

**Answer :- Calculation of Internal Rate of Return (IRR)
:-**

**Initial investment = $441,000**

**Net annual cash flows = $116,529**

**N = 6 years**

**PV factor for IRR :- Initial investment/ Net annual cash
flows**

**PV factor for IRR :- $441,000/ $116,529**

**PV factore for IRR :- 3.78446**

**When we see in the factor table 3.78556 falls under
15%.**

**Internal rate of return (IRR) = 15%**

**- Yes, investment should be accepted because the IRR is
more than the required rate of return which is 10%.**

Exercise 25-05 Bruno Corporation is involved in the business of
injection molding of plastics. It is considering the purchase of a
new computer-aided design and manufacturing machine for $443,000.
The company believes that with this new machine it will improve
productivity and increase quality, resulting in an increase in net
annual cash flows of $104,715 for the next 6 years. Management
requires a 10% rate of return on all new investments. Click here to
view the factor table. Calculate the...

Exercise 12-5 (Video)
Bruno Corporation is involved in the business of injection
molding of plastics. It is considering the purchase of a new
computer-aided design and manufacturing machine for $426,000. The
company believes that with this new machine it will improve
productivity and increase quality, resulting in an increase in net
annual cash flows of $103,614 for the next 6 years. Management
requires a 10% rate of return on all new investments. Click here to
view PV table.
Calculate the...

Exercise 25-06
BSU Inc. wants to purchase a new machine for $45,600, excluding
$1,200 of installation costs. The old machine was bought five years
ago and had an expected economic life of 10 years without salvage
value. This old machine now has a book value of $1,900, and BSU
Inc. expects to sell it for that amount. The new machine would
decrease operating costs by $10,000 each year of its economic life.
The straight-line depreciation method would be used for...

BSU Inc. wants to purchase a new machine for $35,525, excluding
$1,400 of installation costs. The old machine was bought five years
ago and had an expected economic life of 10 years without salvage
value. This old machine now has a book value of $2,200, and BSU
Inc. expects to sell it for that amount. The new machine would
decrease operating costs by $7,500 each year of its economic life.
The straight-line depreciation method would be used for the new...

Exercise 12-6 (Video) BSU Inc. wants to purchase a new machine
for $44,300, excluding $1,500 of installation costs. The old
machine was bought five years ago and had an expected economic life
of 10 years without salvage value. This old machine now has a book
value of $2,200, and BSU Inc. expects to sell it for that amount.
The new machine would decrease operating costs by $10,000 each year
of its economic life. The straight-line depreciation method would
be used...

Sunland Inc. wants to purchase a new machine for $37,840,
excluding $1,300 of installation costs. The old machine was bought
five years ago and had an expected economic life of 10 years
without salvage value. This old machine now has a book value of
$2,100, and Sunland Inc. expects to sell it for that amount. The
new machine would decrease operating costs by $8,000 each year of
its economic life. The straight-line depreciation method would be
used for the new...

Vaughn Inc. wants to purchase a new machine for $45,800,
excluding $1,500 of installation costs. The old machine was bought
five years ago and had an expected economic life of 10 years
without salvage value. This old machine now has a book value of
$2,400, and Vaughn Inc. expects to sell it for that amount. The new
machine would decrease operating costs by $10,000 each year of its
economic life. The straight-line depreciation method would be used
for the new...

An investment that costs $253,406 will reduce operating costs by
$32,130 per year for 11 years. Determine the internal rate of
return of the investment (ignore taxes). (Round present
value factor calculations to 4 decimal places, e.g. 1.2151 and
final answer to 0 decimal places, e.g. 17%.)
Click here to view factor tables
Internal rate of return
enter internal rate of return in
percentages rounded to 0 decimal places %
Should the investment be undertaken if the required rate of...

Vaughn Company is considering a long-term investment project
called ZIP. ZIP will require an investment of $122,200. It will
have a useful life of 4 years and no salvage value. Annual cash
inflows would increase by $79,700, and annual cash outflows would
increase by $39,000. The company’s required rate of return is 12%.
Click here to view PV table.
Calculate the net present value on this project. (If
the net present value is negative, use either a negative sign
preceding...

Exercise 25-10 (Video)
Bramble Company is considering a capital investment of $185,500
in additional productive facilities. The new machinery is expected
to have a useful life of 5 years with no salvage value.
Depreciation is by the straight-line method. During the life of the
investment, annual net income and net annual cash flows are
expected to be $12,614 and $53,000, respectively. Bramble has a 12%
cost of capital rate, which is the required rate of return on the
investment.
Click...

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