Hammer Corporation wants to purchase a new machine for $387,000. Management predicts that the machine will produce sales of $216.000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $73,000 per year. The firm uses straight-line depreciation with an assumed residual (salvage) value of $50,000. Hammer's combined income tax rate, t, is 40%. Management requires a minimum after-tax rate of return of 10% on all investments. What is the approximate internal rate of return (IRR) of the proposed investment? (Note: To answer this question, students should use Table 2 from Appendix C, Chapter 12.) Assume that all cash flows occur at year-end. Multiple Choice mting/blocher_9e/ch12_table_2.htm TABLE 2 Present Value of Annuity of $1 Update Periods 4% 5% 6% 7% 1 8% 0.962 9% 0.952 10% 0.943 11% 0.935 12% 13% 2. 0.926 14% 0.917 1.886 15% 1.859 0.909 20% 1.833 0.901 0.893 1.808 30% 1.783 0.885 0.877 3 25% 0.800 0.870 2.775 1.759 2.723 1.736 0.833 1.713 2.673 0.769 2.624 1.690 1.668 2.577 1.647 4 1.626 2.531 3.630 1.528 2.487 2.444 1.440 3.465 2.402 1.361 3.546 4.329 3.387 2.361 3.312 2.322 2.283 3.240 5 4.452 2.106 3.170 3.102 1.952 4.212 3.037 1.816 4.100 2.974 3.993 2.855 6 3.791 2.589 2.362 3.696 2.914 3.433 5.076 2.166 3.605 3.890 4.486 5.242 6.002 4.767 3.517 4.623 3.352 4.917 5.582 2.991 7 4.355 2.689 4.231 2.436 5.786 5.389 3.998 5.206 3.889 4.11 4.564 3.784 4.868 8 2.951 6.463 4.712 2.643 5.033 5.535 4.423 3.326 3.605 6.733 7.435 5.971 4.288 5.747 4.160 5.335 3.161 9 2.802 7.108 4.968 6.210 6.802 7.360 6.515 5.146 5.537 4.639 4.487 3.837 5.995 3.329 10 5.759 2.925 7.722 5.328 4.946 4.799 5.132 5.426 4.031 6.418 3.463 11 3.019 8.111 8.760 9.385 6.145 6.247 6.710 7.139 7.536 7.024 7.499 5.889 8.306 5.650 7.887 5.216 4.772 5.019 5.234 4.192 6.805 3.571 6.495 3.092 12 6.207 5.938 8.863 5.687 8.384 5.453 7.943 4.327 6.814 13 6.492 9.986 6.194 9.394 7.161 7.487 5.918 5.660 8.853 5.421 3.147 3.190 8.358 4.439 3.656 3.725 3.780 7.904 7.103 6.750 14 6.424 6.122 9.899 5.842 5.583 4.533 10.563 11.118 8.745 8.244 7.786 3.223 7.367 6.982 6.628 15 10.380 6.002 5.724 9.295 9.712 10.106 9.108 3.824 8.559 6.302 6.462 3.249 7.606 7.191 6.811 16 8.061 8.313 11.652 6.142 10.838 5.847 3.859 3.268 8.851 7.824 9.447 9.763 7.379 6.604 17 12.166 6.265 5.954 11.274 10.477 6.974 7.120 3.283 9.122 8.544 7.549 6.729 3.887 3.910 18 6.373 8.022 8.201 6.047 12.659 11.690 10.828 9.372 10.059 10.336 4.611 4.675 4.730 4.775 4.812 4.843 4.870 4.909 7.250 6.840 6.467 3.295 3.304 6.128 19 13.134 12.085 11.158 8.756 8.950 9.129 9.604 8.365 7.702 7.839 7.963 7.366 6.938 6.550 6.198 20 3.311 9.818 8.514 7.025 6.623 6.259 3.316 13.590 14.451 15.247 22 12.462 13.163 13.799 11.470 12.042 12.550 3.928 3.942 3.954 3.970 3.981 10.594 I 1061 11.469 10.201 8.772 8.176 7.469 7.645 7.784 7.170 6.743 6.359 9.442 9.707 24 10.529 8.985 8.348 7.283 3.323 3.327 6.835 6.434 4.937