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The management of Monster Manufacturing Company are evaluating several capital projects. One project would cost the company $45,000 for the purchase of a new machine designed that is expected to cut operating costs by $9,000 per year for the next eight years. At the end of the project's life, the machine could be sold for $5,000. The company uses 10% as the required rate of return for projects of this nature and they initially do not include the effect of taxes on the project.

Required:

A) Determine the net present value of the investment in the machine

B) Determine the project internal rate of return.

C) Based on your asnwers to A and B, would you recommend that Monster Manufacturing move forward with this project? Why? describe.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M938491

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