The Comil Corporation recently purchased a new machine for its factory operations at a cost of $328,325. The investment is expected to generate $115,000 in annual cash flows for a period of four years. The required rate of return is 13%. The old machine has a remaining life of four years. The new machine is expected to have zero value at the end of the four-year period. The disposal value of the old machine at the time of replacement is zero. What is the internal rate of return?

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Asked Dec 3, 2019
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The Comil Corporation recently purchased a new machine for its factory operations at a cost of $328,325. The investment is expected to generate $115,000 in annual cash flows for a period of four years. The required rate of return is 13%. The old machine has a remaining life of four years. The new machine is expected to have zero value at the end of the four-year period. The disposal value of the old machine at the time of replacement is zero. What is the internal rate of return?

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Expert Answer

Step 1

Calculate present v...

$328,325
Present value factor =
$115,000
= 2.855
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$328,325 Present value factor = $115,000 = 2.855

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