Reference no: EM132323835
Question
The Susan Company is debating if they should purchase a new machine for its factory operations at a cost? of? $745,200. The investment is expected to? generate? $150,000 in annual cash flows for a period of eight years. The required rate of return? is? 10%. The old machine has a remaining life of eight years.
The new machine is expected to have zero value at the end of the? eightminus-year period. The disposal value of the old machine at the time of replacement is zero.
What is the Internal Rate of Return of this investment that Susan Company is? making?
A. ?14%
B. ?8%
C. ?12%
D. ?10%
Requirement? 2: Should Susan Company purchase the new? machine? Why?
A. ?No, as the internal rate of return is less than their required rate of return
B. ?Yes, as the internal rate of return is more than their required rate of return
C. ?Yes, as the internal rate of return is the same as their required rate of return
D. There is no way to tell if they should make this investment just based on the Internal Rate of Retur
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