Bendigo Gold Extrusions Corporation recently purchased a new machine for its factory operations at a cost of $521 250.The investment is expected to generate $141 452 in annual cash flows for a period of six years.The required rate of return is 14%.The old machine has a remaining life of six years.The new machine is expected to have zero value at the end of the six-year period.The disposal value of the old machine at the time of replacement is zero.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 all cash flows from a particular project equal to zero. In this case, the IRR is not directly provided, but given the information, it can be calculated or estimated through interpolation or using financial calculators or software. Since the choice provided directly is 16%, it suggests that using the given cash flows and initial investment, when the calculations are performed, the IRR comes out to be approximately 16%. This is a financial metric used to estimate the profitability of potential investments.

Bendigo Gold Extrusions Corporation Recently Purchased a New Machine for Its