Exercise 14-15 (Static) Internal Rate of Return and Net Present Value [LO14-2, LO14-3] Henrie's Drapery...
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Exercise 14-15 (Static) Internal Rate of Return and Net Present Value [LO14-2, LO14-3] Henrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $137,320, including freight and installation. Henrie's estimated the new machine would increase the company's cash inflows, net of expenses, by $40.000 per year. The machine would have a five year useful life and no salvage value Click here to view Exhibit 148-1 and Exhibit 148-2, to determine the appropriate discount factor(s) using table. Required: 1. What is the machine's internal rate of return? (Round your answer to the nearest whole percentage, i.e, 0.123 should be considered os 12%.) 2. Using a discount rate of 14%, what is the machine's net present value? Interpret your results. 3. Suppose the new machine would increase the company's annual cash inflows, net of expenses, by only $37,150 per year. Undel these conditions, what is the internal rate of return? (Round your answer to the nearest whole percentoge, i.e. 0.123 should be considered os 12%.)
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