Refer to the data in Exercise. The company has been using the internal rate of return approach

Question:

Refer to the data in Exercise. The company has been using the 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 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 in excess of 14%? What is the right “hurdle” rate to use for this decision?

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...