Compute the internal rate of return

Reference no: EM132086094

Question: Wendell's Donut Shoppe is investigating the purchase of a new $32,400 donut-making machine. The new machine would permit the company to reduce the amount of part-time help needed, at a cost savings of $6,700 per year. In addition, the new machine would allow the company to produce one new style of donut, resulting in the sale of 1,600 dozen more donuts each year. The company realizes a contribution margin of $2.60 per dozen donuts sold. The new machine would have a six-year useful life.

In addition to the data given previously, assume that the machine will have a $16,000 salvage value at the end of six years. Under these conditions, compute the internal rate of return to the nearest whole percent. (Round discount factor(s) to 3 decimal places.)

Reference no: EM132086094

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