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ABC Corporation wants to buy new equipment that will help their company. The annual revenue provided by the equipment is 300,000 dollars. Operating expenses are: salaries of employees: 70,000 dollars, advertising: 100,000 dollars, maintenance: 30,000 dollars and depreciation: 45,000 dollars. The cost of equipment is 450,000 dollars and has a useful life of ten years with no salvage value. The corporation will not invest in new equipment unless it promises a payback of four years or less. A). Calculate the new equipment internal rate of return, hurdle rate is 18% B). Identify whether the company should accept or reject the project from A up to D

ABC Corporation wants to buy new equipment that will help their company. The annual revenue provided by the equipment is 300,000 dollars. Operating expenses are: salaries of employees: 70,000 dollars, advertising: 100,000 dollars, maintenance: 30,000 dollars and depreciation: 45,000 dollars. The cost of equipment is 450,000 dollars and has a useful life of ten years with no salvage value. The corporation will not invest in new equipment unless it promises a payback of four years or less. A). Calculate the new equipment internal rate of return, hurdle rate is 18% B). Identify whether the company should accept or reject the project from A up to D

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 3P
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ABC Corporation wants to buy new equipment that will help their company. The annual revenue provided by the equipment is 300,000 dollars. Operating expenses are: salaries of employees: 70,000 dollars, advertising: 100,000 dollars, maintenance: 30,000 dollars and depreciation: 45,000 dollars. The cost of equipment is 450,000 dollars and has a useful life of ten years with no salvage value. The corporation will not invest in new equipment unless it promises a payback of four years or less.

A). Calculate the new equipment internal rate of return, hurdle rate is 18%

B). Identify whether the company should accept or reject the project from A up to D

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