Burn Incorporated purchased a $$600,000$ machine to manufacture a specialty tap for electrical equipment. The tap is in high demand and Burn can sell all that it could manufacture for the next $10$ years. To encourage capital investments, the government exempts taxes on profits from new investments in this type of machinery. This legislation most likely will remain in effect in the foreseeable future. The equipment is expected to have $10$ years of useful life and no salvage value at the end of this $10-$year period. The firm uses straight$-$line depreciation. The net cash inflow is expected to be $$144,000$ each year. Burn uses a discount rate of $10\%$ in evaluating its capital investments.

The estimated internal rate of return $($IRR$)$ on this proposed investment is: $($Note: the PV annuity factor from Table $2,$ Appendix C$,10\%,10$ years is $6\mathrm{.}145.)$

Multiple Choice

Indeterminable based on the information provided.

Less than $10\%.$

$12\%.$

$10\%.$