Merton manufacturing company has an opportunity to purchase, Ask an Expert

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Merton Manufacturing Company has an opportunity to purchase some technologically advanced equipment that will reduce the company’s cash outflow for operating expenses by $1,271,000 per year. The cost of the equipment is $8,156,843.32. Merton expects it to have a 10-year useful life and a zero salvage value. The company has established an investment opportunity hurdle rate of 15 percent and uses the straight-line method for depreciation. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.)

Required:

a. Calculate the internal rate of return of the investment opportunity.

b. Indicate whether the investment opportunity should be accepted.

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Financial Accounting, Accounting

Category:- Financial Accounting
Reference No.:- M91393946

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