ABC Company is considering the purchase of a new piece of equipment costing $138,875. The equipment has a 7-year useful life and is expected to generate $24,000 in annual cost savings. ABC has a 4% required rate of return.

Required:

a. What is the internal rate of return for the equipment round to nearest factor

b. Should ABC purchase the new equipment? Why or Why not?

Question

ABC Company is considering the purchase of a new piece of equipment costing $138,875. The equipment has a 7-year useful life and is expected to generate $24,000 in annual cost savings. ABC has a 4% required rate of return.

Required:

a.	What is the internal rate of return for the equipment round to nearest factor

b.	Should ABC purchase the new equipment? Why or Why not?

Quizplus · Accepted Answer

The Answer of ABC Company is considering the purchase of a new piece of equipment costing $138,875. The equipment has a 7-year useful life and is expected to generate $24,000 in annual cost savings. ABC has a 4% required rate of return.

Required:

a.	What is the internal rate of return for the equipment round to nearest factor

b.	Should ABC purchase the new equipment? Why or Why not?

ABC Company Is Considering the Purchase of a New Piece