Tranter, Inc., is considering a project that would have a five-year life and wou

Question

Tranter, Inc., is considering a project that would have a five-year life and would require a $750,000 investment in equipment. At the end of five years, the project would terminate and the equipment would have no salvage value. The project would provide net operating income each year as follows: (Ignore income taxes.)

All of the above items, except for depreciation, represent cash flows. The company's required rate of return is 7%.

Compute the project's net present value. (Negative amount should be indicated by a minus sign. Round discount factor(s) to 3 decimal places, intermediate and final answers to the nearest dollar amount. Omit the "$" sign in your response.)

Compute the project's internal rate of return. (Round discount factor(s) to 3 decimal places and final answer to the closest interest rate. Omit the "%" sign in your response.)

  Sales $ 1,900,000   Variable expenses 1,300,000   Contribution margin 600,000   Fixed expenses:   Fixed out-of-pocket cash expenses $ 350,000   Depreciation 140,000 490,000   Net operating income $ 110,000

Explanation / Answer

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dept.harpercollege.edu/tutoring/documents/Acc102-Review10-12new.pdf

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