Brown Corporation recently purchased a new machine for $339,013.20 with a ten-year life. The old equipment has a remaining life of ten years and no disposal value at the time of replacement. Net cash flows will be $60,000 per year. What is the internal rate of return?

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is the discount rate that makes the net present value (NPV) of cash flows from an investment equal to zero. By calculating the IRR for the given cash flows of $60,000 per year over ten years and an initial investment of $339,013.20, the IRR is found to be approximately 12%.

Brown Corporation Recently Purchased a New Machine for $339,013