Answered

Explore Westonci.ca, the top Q&A platform where your questions are answered by professionals and enthusiasts alike. Discover solutions to your questions from experienced professionals across multiple fields on our comprehensive Q&A platform. Join our platform to connect with experts ready to provide precise answers to your questions in different areas.

Acme Company is considering investing in a new machine that costs $126,594 and that has a useful life of 12 years with no salvage value. The machine will generate $19,500 annually in net cash inflows. The internal rate of return on the investment is: (Round your intermediate calculations to 3-decimals and your internal rate of return calculations to the nearest whole percent.)

Sagot :

Parrain

Answer: 11%

Explanation:

The internal rate of return is the rate that will equate the cash inflows with the cost of investment.

It is therefore the discount rate used to find the present value of an annuity because the inflows are stable and are therefore annuities.

Present value of annuity = Annuity * Present value factor of annuity, 12 years, %?

126,594 = 19,500 * Present value of annuity factor

Present value of annuity factor = 126,594 / 19,500

= 6.492

Go to a present value of annuity factor table and find the interest rate that intersects with 12 years to give a factor of 6.492:

Rate is 11%

View image Parrain
Thanks for using our platform. We aim to provide accurate and up-to-date answers to all your queries. Come back soon. We hope this was helpful. Please come back whenever you need more information or answers to your queries. Westonci.ca is your go-to source for reliable answers. Return soon for more expert insights.