What is the approximate internal rate of return

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Question - Build Corporation wants to purchase a new machine for $290,000. Management predicts that the machine can produce sales of $198,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $88,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Build's combined income tax rate is 30%. Management requires a minimum after-tax rate of return of 10% on all investments.

What is the approximate internal rate of return (IRR) of the investment?

a. Less than 12%.

b. Somewhere between 12% and 14%.

c. Somewhere between 15% and 20%.

d. Somewhere between 20% and 25%.

e. Over 25%.

Reference no: EM133107925

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