ure https:/ t.htm ter 24 Homework Help Save&Exit; Submit Check my work 0 Require
ID: 2560983 • Letter: U
Question
ure https:/ t.htm ter 24 Homework Help Save&Exit; Submit Check my work 0 Required information The following information applies to the questions displayed below 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 What is the internal rate of return if the (Use appropriate factorls) from the tables provided.) company buys this machine? (PY of S1, FV of $1. PVA of $1, and FVA of S ntenal Rabe of Reference links Prey 5of10 Next > MacBoc 0 2 3 4 9Explanation / Answer
IRR is the rate which makes the present value of cash inflows equal to the present value of cash outflows.
Present value of cash outflow = 60,949
Cash inflows for the next 3 years = $25,376. This is an annuity. Present value interest factor of annuity (PVA of $1) for 3 years and r% be "x"
Thus 25,376*x = 60,949
or x = 2.4018
From the PVA of $1 table we can see that 2.4018 belongs to rate of 12% for 3 years.
Thus IRR = 12%
Amount invested / Annual net cash flow = Present value factor 60,949.00 / 25,376.00 = 2.4018 Internal rate of return 12%Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.