Corin Corporation is considering the purchase of a machine that would cost $420,

Question

Corin Corporation is considering the purchase of a machine that would cost $420,000 and would last for 8 years. At the end of 8 years, the machine would have a salvage value of $97,000. The machine would reduce labor and other costs by $76,000 per year. The company requires a minimum pretax return of 16% on all investment projects. (Ignore income taxes.)

Compute the internal rate of return of the project by inputting the variables that are entered into your calculator / Excel.  (If a variable is not used in the calculation, input a zero (0) Round your answer to one decimal place and use a minus sign for negative numbers.

Corin Corporation is considering the purchase of a machine that would cost $420,000 and would last for 8 years. At the end of 8 years, the machine would have a salvage value of $97,000. The machine would reduce labor and other costs by $76,000 per year. The company requires a minimum pretax return of 16% on all investment projects. (Ignore income taxes.)

Explanation / Answer

Hi,

Please find the answer as follows:

Interest Rate = 16%

Nper = 8 Years

PMT = 76000

PV = -420000

FV = 97000

IRR = 11.8%

Thanks.

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