Griffin Co.is considering the investment of $136,000 in a new machine.The machine will generate cash flow of $22,500 per year for each year of its eight-year life and will have a salvage value of $8,000 at the end of its life.Griffin Co.'s cost of capital is 8 percent.
(a.)Calculate the net present value of the proposed investment.Ignore income taxes, and round all answers to the nearest $1.
(b.)What will the internal rate of return on this investment be relative to the cost of capital? Explain your answer.

Question

Quizplus · Accepted Answer

The Answer of Griffin Co.is considering the investment of $136,000 in a new machine.The machine will generate cash flow of $22,500 per year for each year of its eight-year life and will have a salvage value of $8,000 at the end of its life.Griffin Co.'s cost of capital is 8 percent.
(a.)Calculate the net present value of the proposed investment.Ignore income taxes, and round all answers to the nearest $1.
(b.)What will the internal rate of return on this investment be relative to the cost of capital? Explain your answer.