Your firm is evaluating whether to invest in a machine that costs $300,000. With the machine,...

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Your firm is evaluating whether to invest in a machine that costs $300,000. With the machine, your firm projects a net cash inflow of $60,000 at the end of every year for the next 7 years. At the end of the 7 years, your firm will scrap the machine and do not expect to receive any salvage value for it. Calculate the internal rate of return of this investment. Given the cost of capital for the firm is 8%, should your firm purchase the machine? Explain your reason(s). (4 marks) Your firm is evaluating whether to invest in a machine that costs $300,000. With the machine, your firm projects a net cash inflow of $60,000 at the end of every year for the next 7 years. At the end of the 7 years, your firm will scrap the machine and do not expect to receive any salvage value for it. Calculate the internal rate of return of this investment. Given the cost of capital for the firm is 8%, should your firm purchase the machine? Explain your reason(s). (4 marks)

Answer rating: 100% (QA)

Answer I Initial cost of machine Outflow 300000 Net cash inflow 60000 at end of next 7 years Cost of ... View the full answer