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 $436,300. 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 $100,178 for the next 6 years. Management requires a 10% rate of return on all new investments. Click here to view p table. 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.

Explanation / Answer

PV factor for Internal rate of return = 436300/100178= 4.35525 Internal rate of return = 10% The investment should be accepted

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