Performance Needlework needs to purchase a new machine costing $1.25 million.Management is estimating the machine will generate cash inflows of $175,000 the first year and $ 500,000 for the following three years.If management requires a minimum 10 percent rate of return, should the firm purchase this particular machine based on its IRR? Why or why not?
A)Yes, because the IRR is 10.75 percent
B)Yes, because the IRR is 11.28 percent
C)No, because the IRR is 10.75 percent
D)No, because the IRR is 11.28 percent
E)The answer cannot be determined as there are multiple IRRs

Question

Quizplus · Accepted Answer

The IRR of 11.28 percent is greater than the required rate of return of 10 percent, indicating that the investment is expected to generate returns above the minimum threshold, making it a favorable investment.

Performance Needlework Needs to Purchase a New Machine Costing $1