(Present Value Tables Are Required

question 1

Multiple Choice

(Present value tables are required.) Salvador Corporation is considering the purchase of a special blow-molding machine that would cost $64,366 and would have a useful life of 8 years.The machine would generate $11,200 of net annual cash inflows per year for each of the 8 years of its life.The internal rate of return on the machine would be closest to:

• A)8%.
• B)10%.
• C)12%.
• D)14%.

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Definitions:

Net Cash Flow

The total amount of money being transferred in and out of a business, especially as it relates to operational, investing, and financing activities.

Subsidiary Acquired

A business entity whose control is obtained by another entity (parent company) through the acquisition of its majority voting stock.

Financing Cash Flows

Cash flows associated with the raising of capital and repayment of borrowings, including issuing and repurchasing shares, and payment of dividends.