Barlae Auto Repair Inc is evaluating a project to purchase

Barlae Auto Repair, Inc. is evaluating a project to purchase equipment that will not only expand
the company's capacity but also improve the quality of its repair servi
GET THE ANSWER>> https://solutionlly.com/downloads/barlae-auto-repair-inc-is-evaluating-a-
project-to-purchase

Barlae Auto Repair, Inc. is evaluating a project to purchase equipment that will not only expand
the company's capacity but also improve the quality of its repair services. The board of directors
requires all capital investments to meet or exceed the minimum requirement of a 10 percent rate
of return. However, the board has not clearly defined the rate of return. The president and
controller are pondering two different rates of return: unadjusted rate of return and internal rate
of return. The equipment, which costs $200,000, has a life expectancy of five years. The
increased net profit per year will be approximately $14,000, and the increased cash inflow per
year will be approximately $55,400.

Required

Round rates to six decimal points.

a. If it uses the unadjusted rate of return (use average investment) to evaluate this project,
should the company invest in the equipment?

b. If it uses the internal rate of return to evaluate this project, should the company invest in the
equipment?

c. Which method is better for this capital investment decision?

Barlae Auto Repair Inc is evaluating a project to purchase

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project-to-purchase

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