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Homework answers / question archive / Allendale Co
Allendale Co.
The Allendale Co. has recently evaluated a proposal to invest in cost-reducing production technology. According to the evaluation, the project would require an initial investment of $17,166 and would provide equal annual cost savings for five years. Based on a 10 percent discount rate, the project generates a net present value of $1,788. The project is not expected to have any salvage value at the end of its five-year life.
1. Refer to Allendale Co. (Present value tables needed to answer this question.) What are the expected annual cost savings of the project?
2. Refer to Allendale Co. (Present value tables needed to answer this question.) What is the project's expected internal rate of return?
