Question
In: Accounting
12) Lockwood Company would like to purchase a production machine for $100,000. It is likely to...
12) Lockwood Company would like to purchase a production machine for $100,000. It is likely to bring in after-tax cash inflows of $40,000 in year 1, $45,000 in year 2, $50,000 in year 3, and $35,000 in year 4. HINT: USE EXCEL function A) Calculate the Internal Rate of Return (IRR) of the production machine when the discount rate (hurdle rate) is 8%. B) Should the company accept this proposal?
Solutions
Expert Solution
| Year | Cash Flow |
| 0 | -100000 |
| 1 | 40000 |
| 2 | 45000 |
| 3 | 50000 |
| 4 | 35000 |
| Use Excel Function , | 25.41% |
IRR= 25.41%
Yes Company should acept the proposal because IRR is greater than Cost of Capital
ekkarill92 answered 2 years agoRelated Solutions
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company needs a loan to make the purchase. Before agreeing to the
loan, their bank requires Ponpon to provide both current (2020) and
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