Darwin Dental Services is considering purchasing a new dental chair for $727 000.It will require additional working capital of $63 000.Its anticipated eight-year life will generate additional client revenue of $303 000 annually with operating costs,excluding depreciation,of $150 000.At the end of eight years,it will have a salvage value of $59 500 and return $15 000 in working capital.Ignore taxes.
Required:
a.If the company has a required rate of return of 14%,what is the net present value of the proposed investment?
b.What is the internal rate of return?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Question

Quizplus · Accepted Answer

The Answer of Darwin Dental Services is considering purchasing a new dental chair for $727 000.It will require additional working capital of $63 000.Its anticipated eight-year life will generate additional client revenue of $303 000 annually with operating costs,excluding depreciation,of $150 000.At the end of eight years,it will have a salvage value of $59 500 and return $15 000 in working capital.Ignore taxes.
Required:
a.If the company has a required rate of return of 14%,what is the net present value of the proposed investment?
b.What is the internal rate of return?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Darwin Dental Services Is Considering Purchasing a New Dental Chair