Question: Refer to the data in Exercise. The company has been using the internal rate of return approach to evaluate its long-term investments in the past,

Refer to the data in Exercise. The company has been using the internal rate of return approach to evaluate its long-term investments in the past, and its policy has been to invest in only those projects with internal rates return in excess of 14%.

Required:
a. What is the internal rate of return from investing in the injection molding machine? As per company policy, will it accept or reject this option?
b. Assume that the only other option is the one described in Exercise—invest the money in the shares of another company. Will Ronen’s company be making the right choice if it adheres to its policy of requiring an internal rate of return in excess of 14%? What is the right “hurdle” rate to use for this decision?

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