The Enor Machine Company Is Evaluating a Capital Expenditure Proposal

question 60

Essay

The Enor Machine Company is evaluating a capital expenditure proposal that requires an initial investment of $99,360 and has predicted cash inflows of $20,000 per year for 8 years. It will have no salvage value.
Required:
a.Using a required rate of return of 10%, determine the net present value of the investment proposal.
b.Determine the proposal's internal rate of return.

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Definitions:

Medical Expenses

Costs incurred in the prevention or treatment of injury or disease, including fees for physician services, medications, and hospital stays.

Independent Practice Association

An organization of independent physicians, or other healthcare providers, that contracts with health plans or directly with patients to provide care within negotiated price and service constraints.

HMO

Health Maintenance Organization, a type of health insurance plan that requires members to receive healthcare services from a network of designated providers.

Providers

Entities or individuals that supply services or goods.