Question: An organization is considering purchasing a new testing machine for its' production line. The cost of the machine is $100,000. The machine is expected to

An organization is considering purchasing a new testing machine for its' production line. The cost of the machine is $100,000. The machine is expected to be used for seven (7) years and then replaced. The salvage value is estimated to be $25,000. Maintenance costs on the machine are $1000/year. Exclusive of maintenance costs, the machine is expected to save the organization $18,500/year. The organization uses a discount rate of 6% and has a minimally acceptable rate of return (MARR) of 7%.

What is the internal rate of return on this piece of equipment?

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