Your company is considering to buy a new machine that can yield the following (year-end) net benefits: Year 1 - $3,000; Year 2 - $4,000; Year 3 - $5,000; Year 4 - $6,000. At the end of Year 4 the machine can be sold for scrap at an estimated value of $2,500. The vendor is asking for $13,500. 

What is the machine's Internal Rate of Return (IRR) and is it worth buying if the firm's cost of capital is 12%?

Answer rating: 100% (QA)

To calculate the Internal Rate of Return IRR of the machine we need to find the discount rate that m... View the full answer