Pique Corporation Wants to Purchase a New Machine for $300,000

Pique Corporation wants to purchase a new machine for $300,000.Management predicts that the machine can produce sales of $200,000 each year for the next 5 years.Expenses are expected to include direct materials,direct labor,and factory overhead (excluding depreciation) totaling $80,000 per year.The firm uses straight-line depreciation with no residual value for all depreciable assets.Pique's tax rate is 40%.Management requires a minimum 10% rate of return on all investments.What is the approximate internal rate of return (IRR) of the investment? (NOTE: To answer this question,students must have access to Table 2 from Appendix C,Chapter 12. )

A) Less than 12%.
B) Somewhere between 12% and 14%.
C) Somewhere between 15% and 20%.
D) Somewhere between 20% and 25%.
E) Over 25%.