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Question by 365 Days: Kendra Corporation is involved in the business of injection molding of plastics…………?
It is considering the purchase of a new computer-aided design and manufacturing machine for 5,000. The company believes that with this new machine it will improve productivity and increase quality, resulting in an increase in net annual cash flows of ,000 for the next 6 years. Management requires a 10% rate of return on all new investments.

Calculate the internal rate of return on this new machine.

Best answer:

Answer by Robert M
6 Year Statement of Cash Flows
Yr 0 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6

Net Cashflow -5K K K K K K K IRR = 9%

Management should not purchase the machine.

What do you think? Answer below!