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Franklin Mints, a confectioner, is considering purchasing a new jelly bean-making machine at a cost of...

Franklin Mints, a confectioner, is considering purchasing a new jelly bean-making machine at a cost of $363,610. The company's management projects that the cash flows from this investment will be $127,757 for the next seven years. If the appropriate discount rate is 14 percent, what is the IRR that Franklin Mints management can expect on this project? (Round answer to 2 decimal places, e.g. 5.25%.)

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Answer #1

Answer:

IRR = 29.33%

2 4 Year Machine cost Operating cash flows Cash flows IRR 0 5 6 7 ($363,610) 127,757 127,757 $127,757 $127,757 $127,757 $127,757 $127,757 ($363,610)127,757 $127,757 $127,757 $127,757 $127,757 $127,757 $127,757 29.33%

Excel with 'show formula'

1 Year 2 Machine cost 3 Operating cash flows 4 Cash flows 5 IRR 0 363610 127757 127757 127757 127757 127757 127757 127757 -B2+B3 -C2+C3 D2+D3-E2+E3 F2+F3 G2+G3H2+H3 12+13 EIRR(B4:14)

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