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Gamma Electronics is considering the purchase of testing equipment that will cost $500,000 to replace old equipment. Assume the new machine will generate after-tax savings

Gamma Electronics is considering the purchase of testing equipment that will cost $500,000 to replace old equipment. Assume the new machine will generate after-tax savings of $250,000 per year over the next four years. If Gamma Electronics has a 15% cost of capital, what's the IRR of the investment?

23.40% 1

5.00%

34.90%

100.00%

How does the result of 34.9% come out?

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