Bruno Corporation is involved in the business of injection molding of plastics.

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 $427,500. 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 $103,979 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.) Should the investment be accepted?

Explanation / Answer

Year

CashFlow

                        -  

          (427,500)

                          1

             103,979

                          2

             103,979

                          3

             103,979

                          4

             103,979

                          5

             103,979

                          6

             103,979

IRR

12.00%

Investment can be accepted

Year

CashFlow

                        -  

          (427,500)

                          1

             103,979

                          2

             103,979

                          3

             103,979

                          4

             103,979

                          5

             103,979

                          6

             103,979

IRR

12.00%

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