Author Question: Moreno Corporation is considering investing in specialized equipment costing $525,000. The equipment ... (Read 368 times)

yoooooman

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Moreno Corporation is considering investing in specialized equipment costing $525,000. The equipment has a useful life of 5 years and a residual value of $55,000. Depreciation is calculated using the straight-line method. The expected net cash inflows from the investment are:

Year 1 $245,000
Year 2 $190,000
Year 3 $152,000
Year 4 $112,000
Year 5          $95,000
$794,000

Moreno Corporation's required rate of return is 14%.


The net present value of the Moreno Corporation's investment is closest to
◦ $82,729 positive.
◦ $25,639 positive.
◦ $54,184 positive.
◦ $269,000 positive.



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mp14

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Moreno Corporation is considering investing in specialized equipment costing $525,000. The equipment has a useful life of 5 years and a residual value of $55,000. Depreciation is calculated using the straight-line method. The expected net cash inflows from the investment are:

Year 1 $245,000
Year 2 $190,000
Year 3 $152,000
Year 4 $112,000
Year 5          $95,000
$794,000

Moreno Corporation's required rate of return is 14%.


Is the internal rate of return of the Moreno Corporation investment equal to, higher than, or lower than 14%?
◦ Lower than 14%
◦ Higher than 14%
◦ Equal to 14%
◦ Cannot be determined from the given data




 

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