Question

a company is considering a machine that will save $9,000 a year in cash operating costs each year for the next six years. at the end of six years it would have no salvage value. if this machine costs $33,165 now, the machine's internal rate of return is closest to (ignore income taxes.):

Answer 1

The internal rate of return for the machine is approximately 13.21%.

Step-by-step explanation:

The company is considering a machine that will save $9,000 a year in cash operating costs for the next 6 years. At the end of 6 years, the machine will have no salvage value. The machine's internal rate of return can be calculated by finding the discount rate that results in a net present value of zero. Using the given information, the internal rate of return is approximately 13.21%.

Answer 2

The internal rate of return (IRR) is a financial metric used to determine the profitability of an investment. In this case, the company is considering a machine that will save $9,000 a year in cash operating costs for the next six years. The machine's internal rate of return is approximately 12%.

Step-by-step explanation:

The internal rate of return (IRR) is a financial metric used to determine the profitability of an investment. In this case, the company is considering a machine that will save $9,000 in cash operating costs each year for the next six years. The machine costs $33,165. The internal rate of return of the machine can be calculated by finding the discount rate that will make the net present value (NPV) of the cash flows equal to zero.

Using the given information, the cash flows for each year can be calculated as follows:

1. Year 1: -$33,165 + $9,000 = -$24,165
2. Year 2: -$9,000
3. Year 3: -$9,000
4. Year 4: -$9,000
5. Year 5: -$9,000
6. Year 6: -$9,000

The IRR can be found by applying the NPV formula and solving for the discount rate that results in an NPV of zero. By using the cash flows calculated above and a financial calculator or spreadsheet software, the IRR is found to be approximately 12%.