Jenny Durdil Company is considering an investment of $200,000 in new equipment which will be depreciated on a straight-line basis (8-year life, no salvage value). The expected annual revenues and costs of the new product that will be produced from the equipment are:
| Sales Don't use plagiarized sources. Get Your Custom Essay on determine the internal rate of return 618865 Get an essay WRITTEN FOR YOU, Plagiarism free, and by an EXPERT! Just from $10/Page | $292,000 | |
| Less costs and expenses: | ||
| Manufacturing costs | S200,000 | |
| Equipment depreciation | 25,000 | |
| Selling and administrative | 43,900 | 268,900 |
| Income before income taxes | 23,100 | |
| Income tax expense (30%) | 6,930 | |
| Net income | $ 16,170 |
Instructions
(a) Compute the annual rate of return.
(b) Compute the cash payback period.
(c) Compute the net present value assuming a 12% required rate of return.
(d) Determine the internal rate of return.
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