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What is the internal rate of return

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Question - Henrie's Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $137,320, including freight and installation. Henrie's estimated the new machine would increase the company's cash inflows, net of expenses, by $40,000 per year. The machine would have a five-year useful life and no salvage value.

Required -

1. What is the machine's internal rate of return?

2. Using a discount rate of 14%, what is the machine's net present value? Interpret your results.

3. Suppose the new machine would increase the company's annual cash inflows, net of expenses. by only $38,090 per year Under these conditions, what is the internal rate of return?

Reference no: EM133176210

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