Exercise 13.17

Kendra Corporation is involved in the business of injection moulding of plastics. It is considering the purchase of a new computer-aided design and manufacturing machine for $432,400. The company believes that with this new machine it will improve productivity and increase quality, resulting in a $102,600 increase in net annual cash flows for the next five years. Management requires a 8% rate of return on all new investments. Click here to view PV table. Calculate the internal rate of return on this new machine. (Round answer to 0 decimal places, e.g. 10%. For calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.52124.)

Internal rate of return

%

Should management accept the investment?

The investment

shouldshould not

be accepted.