Phoxco Is Considering Automating Its Production Line at a Cost

question 108

Multiple Choice

Phoxco is considering automating its production line at a cost of $40,000 to acquire the necessary equipment. The annual cost savings are expected to be $8,000 for 14 years. The firm requires a 20% rate of return. Ignore income taxes.
What is the internal rate of return on this investment?

• A) Less than 20%
• B) Equal to 20%
• C) More than 20%
• D) Cannot be determined

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Definitions:

Natural Ecosystem

A community of living organisms and their physical environment interacting as a system in nature, untouched by significant human influence.

Successive Trophic Level

A hierarchical position in a food chain or food web, higher levels are progressively further from primary producers in terms of their source of food.

Decreasing Amount

A reduction in quantity, volume, or number over time or in a particular process.

Ecological Pyramid

A graphical representation showing the relationship between different trophic levels in an ecosystem regarding energy, biomass, or numbers.