Calculate the internal rate of return on the machine

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Question 1 - Flak Company purchased a machine for $114,100 and assigned it a seven-year life with no salvage value. The machine is expected to generate net cash inflows of $25,000 per year over its useful life. Flak Company uses a 10% cost of capital in evaluating its capital investment projects. Calculate the internal rate of return (IRR) on the machine.

Question 2 - Watrous Company calculated the net present value on a new machine to be $71,543. The new machine would cost $95,000 and would have a salvage value of $9,800 at the end of its 10-year life. The old machine currently in use can be sold for $3,000 if the new machine is purchased. Assume Watrous Company has a 10% cost of capital. Calculate the accounting rate of return on the new machine.

Question 3 - Kasson Company has budgeted units to be produced for the next five months as follows:

Budgeted units to be produced

June 12,000

July 15,000

August 11,000

September 22,000

October 18,000

Kasson Company used the following information in creating its master budget for the year:

1. Ending direct materials inventory for each month should be equal to 140% of the next month's production needs.

2. Each unit produced requires 2.5 pounds of direct materials.

3. Direct materials are purchased for $2.30 per pound.

Kasson Company pays for 65% of a month's purchase of direct materials in the month of purchase, 25% of a month's purchase of direct materials is paid in the month after purchase, and the final 10% is paid in the second month after the month of purchase.

Calculate Kasson Company's budgeted accounts payable at September 30.

Reference no: EM133176844

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