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ABC Company is considering the purchase of a new piece of equipment costing $138,875. The equipment has a 7-year useful life and is expected to generate $24,000 in annual cost savings. ABC has a 4% required rate of return.
Required:
a. What is the internal rate of return for the equipment round to nearest factor
b. Should ABC purchase the new equipment? Why or Why not?
Lower Of Cost
An accounting principle where the inventory is recorded at either its historical cost or market value, whichever is lower, to report assets conservatively.
Total Inventory Value
The total cost of all items held in inventory by a business, calculated at a specific point in time.
Net Realizable Value
The projected price at which goods are sold, minus the expenses associated with their sale or disposal.
Gross Profit
The profit a company makes after subtracting the costs associated with making and selling its products, or the costs associated with providing its services.
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