Analyzing purchase of a machine costing

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Use the following information to answer two questions on the exam, save your work: Your Company is analyzing purchase of a machine costing $5,900 today. The investment promises to add $18,500 to sales one year from today, $14,500 two years from today and $18,000 three years from today. Incremental cash costs should consume 75% of the incremental sales. The tax rate is 30% and the company’s financing rate is 8.2%. The investment cost is depreciated to zero over a 3-year straight-line schedule. What is the IRR for the project?

a. 37.19%

b. 40.08%

c. 16.95%

d. 26.82%

e. 30.56%

Reference no: EM13814672

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