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Flaco69 Flaco69
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A month ago
Press Smart's pressing machine sells for $185,556. At this price, the annual cost savings that the pressing machine will generate for Rob's Dry Cleaner over its 8-year life will yield an internal rate of return of 12%.  Rob's Dry Cleaner requires that all projects achieve a return of 15%.  

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What price does Rob's Dry Cleaner need to negotiate with Press Smart so that the system will achieve that return?
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Managerial Accounting

Managerial Accounting


Edition: 4th
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heathernhullheathernhull
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A month ago
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At the list price of $185,556, the annual cost savings required to generate a 12% internal rate of return is $37,253.25.

$185,556 ÷ Annual Cost Savings = PVA8, 12%
$185,556 ÷ Annual Cost Savings = 4.9676
Annual Cost Savings = $37,353.25
Rob's Dry Cleaners must negotiate a price of $167,167 to generate an internal rate of return of 15%.
Purchase Price ÷ $37,253.25 = PVA8, 15
 Purchase Price ÷ $37,253.25 = 4.6389
Purchase Price = $172,814
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Flaco69 Author
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A month ago
Thank you, thank you, thank you!
cipcal
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Yesterday
Thanks for your help!!
Smair87
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2 hours ago
Correct Slight Smile TY
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