Simon is the product manager for Packaging Plus. Simon purchased a new packaging machine for $125,000 to save on labor costs. The first year, the machine worked well and the company was able to save $60,000, with machine operating and maintenance expenses of $25,000. The second year, operating expenses were slightly higher at $28,000, but savings increased to $80,000. The third year, expenses increased again to $30,000, and savings decreased to $65,000. The fourth year, the machine began to experience some problems and broke down quite a bit. Expenses were $40,000 and savings decreased even further to $50,000. The company sold the machine for scrap at the end of year 4 for $5,000.

What is the actual IRR for this purchase?

Calculate your answer to the nearest 0.10. (Hint: If using Excel, format the answer for 2 decimal places.)

Enter your answer as 1.23. Do not use a percent ("%") sign. For example, if you calculate an IRR of 13.54%, enter it as 13.54

Answer rating: 100% (QA)

The actual IRR for this purchase can be calculated using the formula for calculating the internal ra... View the full answer