Henries drapery service is investigating the purchase of an

Reference no: EM13599272

Henrie's Drapery Service is investigating the purchase of an new machine for cleaning and blocking drapes. The machine would cost $130,400, including freight and installation. Henrie's has estimated that the new machine would increase the company´s cash inflows, net of expenses, by $25,000 per year. The machine would have a 10-year useful life and no salvage value. (Ignore income taxes.)

Required:

(a) Compute the machine's internal rate of return.Internal rate of return __________%

(b) Compute the machine's net present value. Use a discount rate of 14%.Net present value $_______________

(c) Suppose that the new machine would increase the company's annual cash inflows, net of expenses, by only $22,500 per year. Under these conditions, compute the internal rate of return.Internal rate of return ______________%

Reference no: EM13599272

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