Mindy Corp

question 26

Essay

Mindy Corp.is considering the purchase of a new piece of equipment.The cost savings from the equipment would result in an annual increase in net income after tax of $50,000.The equipment will have an initial cost of $500,000 and have an 8-year life.The equipment has no salvage value.The hurdle rate is 10%.Answer the following:
a.What is the net present value?
b.What would the net present value be with a 15% hurdle rate?
c.Based on the NPV calculations,in what range would the equipment's internal rate of return fall?

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Definitions:

PST

Provincial Sales Tax, which is a tax levied by individual provinces in Canada.

Term Test

An examination conducted during the academic term to assess a student's understanding of the course material covered up to that point.

Average Score

The sum of all individual scores divided by the number of scores, used to find the typical or middle value in a set of numbers.

Mill Rates

Mill Rates are used in property tax assessments and represent the amount per $1,000 of assessed value of property. It is used to calculate the property taxes owed by property owners.