Coolangatta Corporation recently purchased a new machine for $485 650 with a 10-year life.The old equipment has a remaining life of 10 years and no disposal value at the time of replacement.Net cash flows will be $85 956 per year.What is the internal rate of return?

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is calculated by setting the net present value (NPV) of all cash flows equal to zero and solving for the discount rate. Given the initial investment of $485,650 and annual net cash flows of $85,956 for 10 years, the IRR can be found using financial calculators or software designed for such calculations. The IRR in this case is closest to 12%, making option A the correct choice.

Coolangatta Corporation Recently Purchased a New Machine for $485 650