Question

CALCULATOR STANDARD VIEW PRINTER VERSION BACK NEXT Exercise 24-5 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 $445,700. 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 117,770 for the next 6 years. Management requires a 10% rate of retum on all new investments. lic ere Calculate the internal rate of return on this new machine. (Round answer to O decimal places, e.g. 10. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Internal rate of return Should the investment be accepted? The investment be accepted. Click if you would like to Show Work for this question: pen Show Work

Answer 1

Investment cost	445700
Divide by Annual net cash inflows	117770
PV factor for Internal rate of return	3.78450
The PV factor 3.78450 for 6 years is closest to 15%
Internal rate of return = 15%
The investment should be accepted