Lachman Ltd is considering replacing a machine. The cost on 1.1.2023 will be £2.3m. The expected economic life of the equipment will be 4 years. The company depreciates its equipment using the straight-line method. The company expects to sell this equipment for £200,000 after the end of its useful economic life. There are expected cost savings arising from this investment of £900,000 in each of years 1 and 2 and £600,000 in each of years 3 and 4. To the nearest £100, NPV at a discount rate of 8% is + £369,100 and at a discount rate of 20%, it is- £192,700. The Internal Rate of Return of this project is:

Lachman Ltd is considering replacing a machine. The cost on 1.1.2023 will be £2.3m. The expected economic life of the equipment will be 4 years. The company depreciates its equipment using the straight-line method. The company expects to sell this equipment for £200,000 after the end of its useful economic life. There are expected cost savings arising from this investment of £900,000 in each of years 1 and 2 and £600,000 in each of years 3 and 4. To the nearest £100, NPV at a discount rate of 8% is + £369,100 and at a discount rate of 20%, it is- £192,700. The Internal Rate of Return of this project is:

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Description: Which is correct ? Lachman Ltd is considering replacing a machine. The cost on 1.1.2023 will be £2.3m. The expected economic lifeof the equipment will be 4 years. The company depreciates its equipment using the straight-line method. Thecompany expect

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 5PB: Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated...

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