Easton Corporation 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 Easton Corporation's analysis, the project has a net present value of $57,625. 1. Refer to Rhodes Corporation. What discount rate did the company use to compute the net present value? Present value tables or a financial calculator are required.
a. 10 %
b. 11 %
c. 12 %
d. 13 %
2. Refer to Rhodes Corporation. What is the project's profitability index?
a. 1.058
b. .058
c. .945
d. 1.000
3. Refer to Rhodes Corporation. What is the project's internal rate of return? Present value tables or a financial calculator are required.
a. between 12.5 and 13.0 percent
b. between 11.0 and 11.5 percent
c. between 11.5 and 12.0 percent
d. between 13.0 and 13.5 percent