Golab Roofing Is Considering the Purchase of a Crane That

question 69

Multiple Choice

Golab Roofing is considering the purchase of a crane that would cost $69,846, would have a useful life of 6 years, and would have no salvage value. The use of the crane would result in labor savings of $21,000 per year. The internal rate of return on the investment in the crane is closest to (Ignore income taxes.) : Use Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided.

• A) 18%
• B) 20%
• C) 19%
• D) 17%

---

Definitions:

Real Wealth

The value of an individual's or entity's assets, taking into account the effects of inflation on purchasing power.

Liquidity Preference

The desire to hold cash or easily convertible assets rather than investments that might be harder to convert into cash.

Interest Rate

The amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets.

Loanable Funds

The money available for borrowing in the financial markets, corresponding to savings that are lent out for investment.