ACC 560 help A Guide to career/uophelp.com ACC 560 help A Guide to career/uophelp.com | Page 58

Bruno Corporation is involved in the business of injection molding of
plastics. It is considering the purchase of a new computer-aided design
and manufacturing machine for $430,000. The company believes that
with this new machine it will improve productivity and increase quality,
resulting in an increase in net annual cash flows of $101,000 for the next
6 years. Management requires a 10% rate of return on all new
investments.
Instructions
Calculate the internal rate of return on this new machine. Should the
investment be accepted?
E12-8
Pierre's Hair Salon is considering opening a new location in French
Lick, California. The cost of building a new salon is $300,000. A new
salon will normally generate annual revenues of $70,000, with annual
expenses (including depreciation) of $41,500. At the end of 15 years the
salon will have a salvage value of $80,000.
Instructions
Calculate the annual rate of return on the project.
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