Hypore Darby Park Department is considering a new capital investment. The following information is available on the investment. The cost of the machine will be $348,400. The annual cost savings if the new machine is acquired will be $80,000. The machine will have a 6-year life, at which time the terminal disposal value is expected to be zero. Hypore Park Department is assuming no tax consequences. What is the internal rate of return for Hypore Park Department?

Question

Quizplus · Accepted Answer

PV Factor is $348,400 / $80,000 = 4.355. This corresponds to a 10% IRR using the annuity table for a 6-year annuity.

Hypore Darby Park Department Is Considering a New Capital Investment