Question

A company is considering investing in a new machine that requires a cash payment of $60,949. The machine will generate annual cash flows of $25,376 for the next three years.

A company is considering investing in a new machine that requires a cash payment of $60,949 today. The machine will generate annual cash flows of $25,.376 for the next three years QS 24-13 Internal rate of return LO P4 What is the internal rate of return if the company buys this machine? (PV of $1, FV of $1 PVA of $1, and FVA of S) (Use appropr factor(s) from the tables provided.) Answer is complete but not entirely correct. Annual Net Cash Present Value Amount Invested Factor Flow 2.4018 25,376 60,949 Find this factor on the appropriate table to estimate the Internal Rate of Return n= Internal Rate of Return 10%

Answer 1

Search the Present value factor 2.4018 in 3rd year row of Cumulative present value of $1 per annum table.

We found the value in 12% column.

So, Internal rate of return = 12%