(Ignore income taxes in this problem)The management of Elamin Corporation is considering the purchase of a machine that would cost $365,695 and would have a useful life of 9 years.The machine would have no salvage value.The machine would reduce labor and other operating costs by $61,000 per year.The internal rate of return on the investment in the new machine is closest to:

Question

Quizplus · Accepted Answer

Factor of the internal rate of return = Investment required ÷ Annual net cash inflow
= $365,695 ÷ $61,000 = 5.995
This factor is the present value of an annuity for 9 periods at 9% per period.

(Ignore Income Taxes in This Problem)The Management of Elamin Corporation