Bruno corporation is involved in the business of injecting molding of plastics.

Question

Bruno corporation is involved in the business of injecting molding of plastics. It is considered the purchase of a new computer aided design and manufacturing machine for $430,000. The company believes that with this new machine it will improve productivity increase quality resulting in an increase in net annual cash flow's of $101,000 for the next six years management requires a 10% rate of return on all New investments. Instructions calculate the internal rate of return on this new machine. Should the investment be excepted? Bruno corporation is involved in the business of injecting molding of plastics. It is considered the purchase of a new computer aided design and manufacturing machine for $430,000. The company believes that with this new machine it will improve productivity increase quality resulting in an increase in net annual cash flow's of $101,000 for the next six years management requires a 10% rate of return on all New investments. Instructions calculate the internal rate of return on this new machine. Should the investment be excepted?

Explanation / Answer

calculation of irr

irr= 10%+9,881/12,597

= 10.78%

and discount factor @ 10% the npv is positive so the project is accpetble

year cashflow discount factor/annuity factor @ 10% discount amount discount factor /annuity factor@ 11% discount amount 0 $ (430,000) 1 $ (430,000) 1 $ (430,000) 1-6 $ 101,000 4.35526 $ 439,881 4.23053 $ 427,284 npv $ 9,881 npv $ (2,716)

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.