Lopez CoIs Interested in Purchasing Equipment That Would Improve Its Operational

Lopez Co.is interested in purchasing equipment that would improve its operational efficiency.The cost of the equipment is $400,000 with an estimated residual value of $30,000 and a useful life of ten years.The equipment is expected to generate cash inflows of $60,000 a year.The company's minimum rate of return is 8 percent.The present value of $1 for ten years at 8 percent is 0.463,and the present value of an annuity of $1 at 8 percent and ten years is 6.710.
-Using the above information for Lopez,the actual rate of return that the project earns is

A) negative.
B) greater than 8 percent.
C) less than 8 percent.
D) equal to 8 percent.

Correct Answer:

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