Kohima Ltd. is involved in the business of injection molding of plastics. It is considering the purchase

Question:

Kohima Ltd. 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 Rs4,300,000. 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 Rs1,010,000 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...

Fantastic news! We've Found the answer you've been seeking!