Rogue Corporation is planning to replace an old machine. The annual cost of operating the old machinery is P138,600 excluding depreciation, while the estimate for the new machinery is P91,300. The cost of the new machinery is P160,000,net of the trade in allowance, with an estimated useful life of 8 years, no salvage value. The effective income tax rate is 40% and the cost of capital is 8%. The old machinery has a annual depreciation of P15,000 while the new machinery is estimated to have an annual depreciation of P20,000. The book value of the old machine is zero. Compute for the internal rate of return of the investment. Use 3 decimal places for PV factors.

Rogue Corporation is planning to replace an old machine. The annual cost of operating the old machinery is P138,600 excluding depreciation, while the estimate for the new machinery is P91,300. The cost of the new machinery is P160,000,net of the trade in allowance, with an estimated useful life of 8 years, no salvage value. The effective income tax rate is 40% and the cost of capital is 8%. The old machinery has a annual depreciation of P15,000 while the new machinery is estimated to have an annual depreciation of P20,000. The book value of the old machine is zero. Compute for the internal rate of return of the investment. Use 3 decimal places for PV factors.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 4E

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