(Ignore income taxes in this problem. )The Valentine Company has decided to buy a machine costing $14,750.Estimated cash savings from using the new machine amount to $4,500 per year.The machine will have no salvage value at the end of its useful life of five years.If Valentine's required rate of return is 10%,the machine's internal rate of return is closest to:

Question

Quizplus · Accepted Answer

Factor of the internal rate of return = Investment required F1F1F1S1F1F1F10 Annual net cash inflow
= $14,750 F1F1F1S1F1F1F10 $4,500 = 3.278
The factor of 3.278 for 5 years represents an internal rate of return of 16%.

(Ignore Income Taxes in This Problem