Press Smart's Pressing Machine Sells for $185,556

question 131

Essay

Press Smart's pressing machine sells for $185,556.At this price, the annual cost savings that the pressing machine will generate for Rob's Dry Cleaner over its 8-year life will yield an internal rate of return of 12%.Rob's Dry Cleaner requires that all projects achieve a return of 15%.
Required:
What price does Rob's Dry Cleaner need to negotiate with Press Smart so that the system will achieve that return?

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Definitions:

Opportunity Cost

The importance of the best alternative sacrifice due to choosing a particular path.

Bushel

A unit of volume that is used for measuring agricultural products such as grains, with the exact size varying by commodity and country.

Oranges

A citrus fruit commonly consumed fresh or processed for its juice, known for its rich vitamin C content.

Terms of Trade

The ratio at which a country can trade its exports for imports from other countries, reflecting the relative prices of goods between nations.