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Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen
Edition 1ISBN: 978-0538736787Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen
Edition 1ISBN: 978-0538736787 Exercise 11
NPV AND IRR Each of the following scenarios is independent. All cash flows are after-tax cash flows.
Required:
1. Wetzel Corporation is considering the purchase of a computer-aided manufacturing system. The cash benefits will be $600,000 per year. The system costs $3,600,000 and will last eight years. Compute the NPV assuming a discount rate of 10 percent. Should the company buy the new system?
2. Nephi Swasey has just invested $540,000 in a restaurant specializing in German food. He expects to receive $86,940 per year for the next eight years. His cost of capital is 5.5 percent. Compute the internal rate of return. Did Nephi make a good decision?
Required:
1. Wetzel Corporation is considering the purchase of a computer-aided manufacturing system. The cash benefits will be $600,000 per year. The system costs $3,600,000 and will last eight years. Compute the NPV assuming a discount rate of 10 percent. Should the company buy the new system?
2. Nephi Swasey has just invested $540,000 in a restaurant specializing in German food. He expects to receive $86,940 per year for the next eight years. His cost of capital is 5.5 percent. Compute the internal rate of return. Did Nephi make a good decision?
Explanation
Verified
Verified
1.
Calculate NPV:
The NPV is computed ...
Cornerstones of Cost Accounting 1st Edition by Don Hansen,Maryanne Mowen
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