Nuff Folding Box Company, Inc. is considering purchasing a new gluing machine. T

Question

Nuff Folding Box Company, Inc. is considering purchasing a new gluing machine. The gluing machine costs $ 50,000 and requires installation costs of $2,500. This outlay would be partially offset by the sale of an existing gluer. The existing gluer originally cost $10,000 and is four years old. It is being depreciated under MACRS using a five-year recovery schedule and can currently be sold for $150,000. The existing gluer has a remaining useful life of five years. If held until year 5, the existing machine's market value would be zero. Over its five-year life, the new machine should reduce operating costs(excluding depreciation) by $17,000 per year. Training costs of employees who will operate the new machine will be one-time cost of $5,000 which should be included in the initial outlay. The new machine will be depreciated under MACRS using a five-year recovery period. The firm has a 12 percent cost of capital and a 40 percent tax on ordinary income and capital gaind.

The internal rate of return for the project is ?

- greater than 12 percent

-between 7 and 8 percent

- between 10 and 11 percent

- between 9 and 10 percent

Explanation / Answer

between 9 and 10 percent ans:d pls rate it.

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