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What is the approximate internal rate of return

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Question - Hammer Corporation wants to purchase a new machine for $303,000. Management predicts that the machine will produce sales of $216,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $71,000 per year. The firm uses straight-line depreciation with an assumed residual (salvage) value of $50,000. Hammer's combined income tax rate, t, is 40%.

Required - 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 proposed investment?

Reference no: EM133164530

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