An Old Machine with a Book Value of $30,000 Was

question 186

True/False

An old machine with a book value of $30,000 was traded in on a new similar machine. The new machine, which had a cash price of $120,000, was purchased for $56,000 cash plus the old machine. The cost of the new machine will be $80,000.

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Definitions:

IRR

Internal Rate of Return; the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero, used in capital budgeting to measure the profitability of an investment.

Cash Flows

The total amount of money being transferred into and out of a business, particularly affecting liquidity.

Replacement Proposal

A plan to replace an existing asset or system with a new one, often evaluated based on cost, efficiency, and potential benefits.

Initial Cash Flows

The initial amount of money invested or generated at the start of a project or investment.