Scheer Corporation is involved in the business of injection molding of plastics. It is considering the purchase

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Scheer 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 $425,000. 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 $95,000 for the next 6 years. Management requires a 10% rate of return on all new investments.

Instructions
Calculate the internal rate of return on this new machine. Should the investment be accepted?

Internal Rate of Return
Internal Rate of Return of IRR is a capital budgeting tool that is used to assess the viability of an investment opportunity. IRR is the true rate of return that a project is capable of generating. It is a metric that tells you about the investment...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Managerial Accounting Tools for business decision making

ISBN: 978-0470477144

5th edition

Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso

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