Henrie’s Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $137,320, including freight and installation. Henrie’s has estimated that the new machine would increase the company’s cash inflows, net of expenses, by $40,000 per year. The machine would have a five-year useful life and no salvage value.

Required:
1.
Compute the machine’s internal rate of return to the nearest whole percent.

2.Compute the machine’s net present value. Use a discount rate of 14%. (Any cash outflows should be indicated by a minus sign. Round discount factor(s) to 3 decimal places.)

3.
Suppose that the new machine would increase the company’s annual cash inflows, net of expenses, by only $38,090 per year. Under these conditions, compute the internal rate of return to the nearest whole percent.

Shrieves casting company is considering adding a new line to its product mix, and the capital budgeting analysis is being conducted by sidney johnson, a recently graduated mba. the production line would be set up in unused space in the main plant. the machinery’s invoice price would be approximately $200,000, another $10,000 in shipping charges would be required, and it would cost an additional $30,000 to install the equipment. the machinery has an economic life of 4 years, and shrieves has obtained a special tax ruling that places the equipment in the macrs 3-year class. the machinery is expected to have a salvage value of $25,000 after 4 years of use. the new line would generate incremental sales of 1,250 units per year for 4 years at an incremental cost of $100 per unit in the first year, excluding depreciation. each unit can be sold for $200 in the first year. the sales price and cost are both expected to increase by 3% per year due to inflation. further, to handle the new line, the firm’s net working capital would have to increase by an amount equal to 12% of sales revenues. the firm’s tax rate is 40%, and its overall weighted average cost of capital, which is the risk-adjusted cost of capital for an average project (r), is 10%. define “incremental cash flow.” (1) should you subtract interest expense or dividends when calculating project cash flow?

Heather has been an active participant in a defined benefit plan for 19 years. during her last 6 years of employment, heather earned $42,000, $48,000, $56,000, $80,000, $89,000, and $108,000, respectively (representing her highest-income years). calculate heather’s maximum allowable benefits from her qualified plan (assume that there are fewer than 100 participants). assume that heather’s average compensation for her three highest years is $199,700. calculate her maximum allowable benefits.

Before setting your prices, it's wise to a. subtract your profit margin from your costs. b. research industry standards. c. memorize the formula for cost plus. d. ignore your competitors' prices.