(Ignore income taxes in this problem.)Laws Corporation is considering the purchase of a machine costing $16,000.Estimated cash savings from using the new machine are $4,120 per year.The machine will have no salvage value at the end of its useful life of six years and the required rate of return for Laws Corporation is 12%.The machine's internal rate of return is closest to:

Question

Quizplus · Accepted Answer

Factor of the internal rate of return = Investment required ÷ Annual net cash inflow
= $16,000 ÷ $4,120 = 3.884
This factor is closest to the present value of an annuity for 6 periods at 14% per period.

(Ignore Income Taxes in This Problem