Henries Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $137,280, including freight and installation. Henries has estimated that the new machine would increase the companys cash inflows, net of expenses, by $40,000 per year. The machine would have a five-year useful life and no salvage value.

Required:

1. Compute the machines internal rate of return to the nearest whole percent.

2. Compute the machines net present value. Use a discount rate of 14%. Why do you have a zero net present value?

3. Suppose that the new machine would increase the companys annual cash inflows, net of expenses, by only $37,150 per year. Under these conditions, compute the internal rate of return to the nearest whole percent.