Applecross Dental Services is investigating expanding its operations by acquiring additional teeth cleaning equipment. The equipment would cost $146,000 and management has estimated that it would result in net cash inflows of $14,400 per year. The equipment would have a 15-year useful life with an expected salvage value of $14,200. (Ignore income taxes.) Required: 1. Compute the equipment's IRR. (Hint: Use Microsoft Excel to calculate the discount factor(s).) (Do not round intermediate calculations and round your final answer to 1 decimal place.) Internal rate of return 2-a. Assume that instead of $14,400, the salvage value in 15 years for the new equipment will be $0, Compute the IRR under this new assumption. (Do not round intermediate calculations and round your final answer to 1 decimal place.) Internal rate of retun 2-b. This part of the question is not part of your Connect assignment.

Applecross Dental Services is investigating expanding its operations by acquiring additional teeth cleaning equipment. The equipment would cost $146,000 and management has estimated that it would result in net cash inflows of $14,400 per year. The equipment would have a 15-year useful life with an expected salvage value of $14,200. (Ignore income taxes.) Required: 1. Compute the equipment's IRR. (Hint: Use Microsoft Excel to calculate the discount factor(s).) (Do not round intermediate calculations and round your final answer to 1 decimal place.) Internal rate of return 2-a. Assume that instead of $14,400, the salvage value in 15 years for the new equipment will be $0, Compute the IRR under this new assumption. (Do not round intermediate calculations and round your final answer to 1 decimal place.) Internal rate of retun 2-b. This part of the question is not part of your Connect assignment.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 12P

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