Acompany projects an increase in net income of $193500 each year for the next five years if it invests $9 in new equipment. the equipment has a 5-year life and an estimated salvage value of $3. what is the annual rate of return on this investment?
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Ответ:
The Internal Rate of Return (IRR)10,74%
Explanation:
We use excel or a spreadsheet to calculate this ratio. See document attached.
We use a cash flow to solve this problem.
At moment 0 we have the investment cost , in this case $900000. From period 1 to period 5, we have incomes o benefits of $1935000.
At period 5 we have to consider the estimated salvage value of $300000.
Then, we calculate the Net cash flow that is the difference between benefits and cost.
We use all the result (positive and negative) in Net cash flow to get the IRR.
Ответ:
Explanation:
The correct value of inventory:
Year end balance $267,670
Add:
Goods purchased on term FOB shipping point $25,600
Goods sold on terms FOB destination $52,170
Less: Goods purchased on terms FOB destination ($43,630)
Correct inventory as on December 31 $301,810