HI Corporation is considering the purchase of a machine that promises to reduce operating costs by the same amount for every year of its 5-year useful life. The machine will cost $205,980 and has no salvage value. The machine has a 14% internal rate of return. (Ignore income taxes.)See separate Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using the tables provided.Required:What are the annual cost savings promised by the machine?
What will be an ideal response?
Factor of the internal rate of return = Investment required ÷ Annual net cash inflow
3.433 = $205,980 ÷ Annual net cash inflow
Annual net cash inflow = $205,980 ÷ 3.433 = $60,000
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What will be an ideal response?
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Answer the following statement true (T) or false (F)
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Indicate whether the statement is true or false
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