Brief Exercise 24-7 Kanye Company is evaluating the purchase of a rebuilt spot-w

Question

Brief Exercise 24-7 Kanye Company is evaluating the purchase of a rebuilt spot-welding machine to be used in the manufacture of a new product. The machine will cost $172,000, has an estimated useful life of 7 years, a salvage value of zero, and will increase net annual cash flows by $33,036. Click here to view PV table.
What is its approximate internal rate of return? (Round answer to 0 decimal place, e.g. 125.)
Internal rate of return %
Brief Exercise 24-7 Kanye Company is evaluating the purchase of a rebuilt spot-welding machine to be used in the manufacture o a new product. The machine will cost $172,000, has an estimated useful life of 7 years, a salvage value of zero, and will increase net annual cash flows by $33,036. Click here to view PV table What is its approximate internal rate of return? (Round answer to o decimal place, e.g. 125.) Internal rate of return Click if you would like to Show Work for this question: Open Show Work Question Attempts: o of 5 used SAVE FOR LATER BHIT ANSWER

Explanation / Answer

Solution :

Cost of Machine = $172,000

Annual Incremental Cash flows for 7 years = $33,036

Present value factor for annual cash flows = 172000/33036 = 5.2064

On review of PV Table present value of cash flow for $1 is 5.2064 comes at IRR of 8%

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