Question

If you are using a discount rate of 8% to evaluate the acquisition of an Ultrasound...

If you are using a discount rate of 8% to evaluate the acquisition of an Ultrasound Machine, and the IRR is 8%, what can you conclude about the ROI of the project? Would you recommend investing in the proposed project?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The correct answer is " Should be Invested"

The internal rate of return is the average return that an investment gives annually over the lifetime of the project, It assumes that the cash flows are reinvested at the IRR rate itself, So if Discount rate and the IRR rate are same then it means that the project is giving equal return as that of cost of capital or Minimum rate of return, So it would be worthy for the company to invest in the project as they are incurring any losses.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The president of Real Time Inc. has asked you to evaluate the proposed acquisition of a...
The president of Real Time Inc. has asked you to evaluate the proposed acquisition of a new machine. The machine's price is $40,000, and it falls into the MACRS 3-year class. Purchase of the machine would require an increase in net operating working capital of $2,000. The computer would increase the firm's before-tax revenues by $25,000 per year but would also increase operating costs by $19,000 per year. The machine is expected to be used for 3 years and then...
How would the discount rate used to evaluate a replacement or repair project, such as a...
How would the discount rate used to evaluate a replacement or repair project, such as a leaky roof, be different from the discount rate for an investment in a new product or service? Why would the discount rates differ?
A proposed acquisition of a multifamily ‘value add’ project has a capitalization rate of 7%, and...
A proposed acquisition of a multifamily ‘value add’ project has a capitalization rate of 7%, and project Un-levered IRRs of 10% over five years. However, you are told that the acquisition could be done with the following capital structure: 60% 1st mortgage debt at an 8% rate, 10% mezzanine debt at an 11% rate, and 30% equity. With the new capitalization, the levered returns are projected to be 15% over five years. Given that the first mortgage debt and mezzanine...
You have been asked to evaluate the following project: Your insurance company will receive cash flows...
You have been asked to evaluate the following project: Your insurance company will receive cash flows of $2.5 million/year for 5 years. In return, you will make a payment of $16 million in 9 years. a. What is the IRR of this project? b. Assuming an 8% discount rate, does the IRR rule tell you to accept or reject this project? c. What is the NPV of this investment?
The president of the company you work for has asked you to evaluate the proposed acquisition...
The president of the company you work for has asked you to evaluate the proposed acquisition of a new chromatograph for the firm’s R&D department. The equipment's basic price is $160,000, and it would cost another $24,000 to modify it for special use by your firm. The chromatograph, which falls into the MACRS 3-year class, would be sold after 3 years for $56,000. The MACRS rates for the first 3 years are 0.3333, 0.4445 and 0.1481. Use of the equipment...
You have been asked by the president of your company to evaluate the proposed acquisition of...
You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $50,000. The truck falls into the MACRS 3-year class, and it will be sold after three years for $19,100. Use of the truck will require an increase in NWC (spare parts inventory) of $1,100. The truck will have no effect on revenues, but it is expected to save the firm $17,200 per year in before-tax operating costs, mainly labor....
You have been asked by the president of your company to evaluate the proposed acquisition of...
You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $380,000. The truck falls into the MACRS 5-year class, and it will be sold after 5 years for $63,000. Use of the truck will require an increase in NWC (spare parts inventory) of $6,300. The truck will have no effect on revenues, but it is expected to save the firm $101,000 per year in before-tax operating costs, mainly labor....
The president of the company you work for has asked you to evaluate the proposed acquisition...
The president of the company you work for has asked you to evaluate the proposed acquisition of a new chromatograph for the firm’s R&D department. The equipment's basic price is $160,000, and it would cost another $24,000 to modify it for special use by your firm. The chromatograph, which falls into the MACRS 3-year class, would be sold after 3 years for $72,000. The MACRS rates for the first three years are 0.3333, 0.4445, and 0.1481. Use of the equipment...
​Payback, NPV, and IRR: Rieger International is evaluating the feasibility of investing ​$96,000 in a piece...
​Payback, NPV, and IRR: Rieger International is evaluating the feasibility of investing ​$96,000 in a piece of equipment that has a 5​-year life. The firm has estimated the cash inflows associated with the proposal as shown in the following​ table: The firm has a 8% cost of capital. a.  Calculate the payback period for the proposed investment. b.  Calculate the net present value​ (NPV) for the proposed investment. c.  Calculate the internal rate of return ​(IRR)​, rounded to the nearest...
The president of the company you work for has asked you to evaluate the proposed acquisition...
The president of the company you work for has asked you to evaluate the proposed acquisition of a new chromatograph for the firm’s R&D department The equipment's basic price is $110,000, and it would cost another $27,500 to modify it for special use by your firm. The chromatograph, which falls into the MACRS 3-year class, would be sold after 3 years for $27,500. Use of the equipment would require an increase in net working capital (spare parts inventory) of $4,400....
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT