(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 Present Value

The difference between the present value of cash inflows and outflows over a period, used to evaluate the profitability of an investment.

Equity-Financed

Refers to funding a company's operations or projects through the sale of shares, rather than borrowing or using current assets.

Price Per Share

The market price of a single share of a company’s stock, representing the smallest unit of the company’s equity that investors can purchase.

Synergy Value

The additional value generated from the combining of two or more entities, often expected in mergers or acquisitions.