Read Publishing is considering the purchase of a used printing press costing $84
ID: 2454868 • Letter: R
Question
Read Publishing is considering the purchase of a used printing press costing $84,200. The printing press would generate a net cash inflow of $37,422 a year for 3 years. At the end of 3 years, the press would have no salvage value. The company's cost of capital is 10 percent. The company uses straight-line depreciation. The present value factors of an annuity of $1.00 for different rates of return are as follows:
Cost of Capital
Period
8%
10%
12%
14%
16%
2
1.78
1.74
1.69
1.65
1.61
3
2.58
2.49
2.40
2.32
2.25
4
3.31
3.17
3.04
2.91
2.80
The investments internal rate of return (rounded to the nearest percent) is
Select one:
A. 10 percent.
B. 16 percent.
C. 14 percent.
D. 12 percent.
Cost of Capital
Explanation / Answer
Read Publishing is considering the purchase of a used printing press costing $84
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