Question -
Westmont Publishing is considering the purchase of a used printing press costing $75,200. The printing press would generate a net cash inflow of $31,310 a year for 3 years. At the end of 3 years, the press would have no salvage value. The company's cost of capital is 10 percent. The company uses straight-line depreciation. The present value factors of an annuity of $1.00 for different rates of return are as follows:
|
|
Cost of Capital
|
|
Period
|
8%
|
10%
|
12%
|
14%
|
16%
|
|
2
|
1.78326
|
1.73554
|
1.69005
|
1.64666
|
1.60523
|
|
3
|
2.57710
|
2.48685
|
2.40183
|
2.32163
|
2.24589
|
|
4
|
3.31213
|
3.16987
|
3.03735
|
2.91371
|
2.79818
|
The investments internal rate of return (rounded to the nearest percent) is: