Use the following to answer questions
Chicago Co. is interested in purchasing a machine that would improve its operational efficiency. The cost is $200,000 with an estimated residual value of $20,000 and a useful life of eight years. Cash inflows are expected to increase by $40,000 a year. The company’s minimum rate of return is 10 percent. The present value of $1 for eight years at 10 percent is 0.467, and the present value of an annuity of $1 at 10 percent and eight years is 5.335.
. The net present value of the project is
$93,400.
$22,740.
$120,100.
$74,520.
. The project earns a rate of return of
less than 10 percent.
Unable to determine from the data given
10 percent.
greater than 10 percent.
