Question

Bruno Corporation is involved in the business of injection molding of plastics. It is considering the purchase of a new computer-aided design and manufacturing machine for $446,500. The company believes that with this new machine it will improve productivity and increase quality, resulting in an increase in net annual cash flows of $108,600 for the next 6 years. Management requires a 10% rate of return on all new investments. Click here to view PV table.

Calculate the internal rate of return on this new machine. (Round answer to 0 decimal places, e.g. 10. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

Internal rate of return

enter the internal rate of return in percentages rounded to 0 decimal places %

Should the investment be accepted?

The investment select whether the investment should be accepted                                                          shouldshould not be accepted.

Answer 1

a) calawation 4 PRR = cost of the New Machine Annual cosh flows $ 446,500 $ 108,600 - 4.1114 PM Annuity factor @ 12% for 6 yrs - 4.1114 PRR = 12% b) Since, 2RR waited's higher than the vequind uated deton ie 107. investment should be accepted