Chicago Co is interested in purchasing a machine that would improve its operational efficiency. The cost is $200,000 with an estimated residual value of $20,000 and a useful life of eight years. Cash inflows are expected to increase by $40,000 a year. The company's minimum rate of return is 10 percent. The present value of $1 for eight years at 10 percent is 0.467, and the present value of an

annuity of $1 at 10 percent and eight years is 5.335. The project earns a rate of return of
a. Unable to determine from the data given
b. greater than 10 percent.
c. less than 10 percent.
d. 10 percent.


B

Business

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