Byron Corp Is Considering the Purchase of a New Piece

question 4

Multiple Choice

Byron Corp is considering the purchase of a new piece of equipment.The cost savings from the equipment would result in an annual increase in cash flow of $100,000.The equipment will have an initial cost of $400,000 and have a 5 year life.The salvage value of the equipment is estimated to be $75,000.If the hurdle rate is 10%,what is the internal rate of return?

• A)between 6% and 8%
• B)between 8% and 10%
• C)between 10% and 12%
• D)between 12% and 14%

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Definitions:

Indirect

Not directly caused by or resulting from something else; a secondary or circumstantial connection rather than a direct one.

Factory Equipment

The machinery and tools used in the manufacturing process within a factory to produce goods.

Depreciation

Depreciation is the systematic allocation of an asset's cost over its useful life, reflecting the decrease in the asset's value due to wear and tear, decay, or obsolescence.

Indirect

Pertains to a cost or effect that is not directly traceable to a specific cause, object, or activity, often referring to overhead costs in a business setting.