Refer to the data in the previous exercise. Polyplast 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%.

Data From previous Exercise

Polyplast is considering purchasing an injection-molding machine for $500,000. This machine will, before considering taxes and depreciation, reduce costs by $108,000 per year. Polyplast's tax rate is 30%, and the machine will not have any salvage value at the end of its 10 year useful life. (Assume straight-line depreciation for tax purposes and a discount rate of 12%; further assume that the purchase price is paid now and that all other cash flows occur at year end).

Required:

What is the internal rate of return from investing in the machine? As per company policy, will Polyplast buy the machine?