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R Co
R Co.
R Co. is involved in the evaluation of a new computer-integrated manufacturing system. The system has a projected initial cost of $1,000,000. It has an expected life of six years, with no salvage value, and is expected to generate annual cost savings of $250,000. Based on R Co.'s analysis, the project has a net present value of $57,625.
1. Refer to R Co. (Present value tables needed to answer this question.) What discount rate did the company use to compute the net present value?
2. Refer to R Co. What is the project's profitability index?
3. Refer to R Co. (Present value tables needed to answer this question.) What is the project's internal rate of return?
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