Fortin Co. is acquiring a machine that costs $90,000 and requires $2,628 in transportation and installation. A discount rate of 13% is appropriate for the 8 years the machine will last. Annual cost savings are estimated to be $18,000. Ignore income taxes.
a)Compute the net present value. Should the machine be purchased?
b)Compute the internal rate of return.
c)Compute the profitability index.

Question

Quizplus · Accepted Answer

The Answer of Fortin Co. is acquiring a machine that costs $90,000 and requires $2,628 in transportation and installation. A discount rate of 13% is appropriate for the 8 years the machine will last. Annual cost savings are estimated to be $18,000. Ignore income taxes.
a)Compute the net present value. Should the machine be purchased?
b)Compute the internal rate of return.
c)Compute the profitability index.

Fortin Co Is Acquiring a Machine That Costs $90,000 and Requires