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Evaluate the approximate internal rate of return

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Reference no: EM132541504

BSU Inc. wants to purchase a new machine for $35,386, excluding $1,500 of installation costs. The old machine was bought five years ago and had an expected economic life of 10 years without salvage value. This old machine now has a book value of $2,200, and BSU Inc. expects to sell it for that amount. The new machine would decrease operating costs by $8,200 each year of its economic life. The straight-line depreciation method would be used for the new machine, for a six-year period with no salvage value.

Question 1: Determine the cash payback period.(Round cash payback period to 2 decimal places, e.g. 10.53.)

Question 2: Determine the approximate internal rate of return.(Round answer to 0 decimal places, e.g. 13%. For calculation purposes, use 5 decimal places as displayed in the factor table provided.)

Question 3: Assuming the company has a required rate of return of 10%, determine whether the new machine should be purchased.

Reference no: EM132541504

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