Crockin Corporation 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.): Use Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using the tables provided.

Question

Quizplus · Accepted Answer

Factor of the internal rate of return = Investment required ÷ Annual net cash inflow
= $33,165 ÷ $9,000 = 3.685
This factor is the present value of an annuity for 6 periods at 16% per period.

Crockin Corporation Is Considering a Machine That Will Save $9,000