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What is the machine internal rate of return

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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:

Problem 1. What is the machine's internal rate of return? (Round your final answer to the nearest whole percentage.)

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

Problem 3. Suppose the new machine would increase the company's annual cash inflows, net of expenses, by only $37,150 per year. Under these conditions, what is the internal rate of return? (Round your final answer to the nearest whole percentage.)

Reference no: EM132840805

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