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Indiana Machining Company (IMC): (6+6 marks) IMC has consulted you to provide advice on capital investment decision. They find that the internal rate of return
Indiana Machining Company (IMC): (6+6 marks) IMC has consulted you to provide advice on capital investment decision. They find that the internal rate of return (IRR) for the first option is high. They would like you to advise them if their decision is correct. The following are the details. Transaction Details Option 1: Option 2: General Specialised machine machine Cash flows (in thousands of AUD) Initial investment by IMC 100 200 Inflows to IMC after one year 130 250 30% 25% IRR - calculated Calculate the NPV under a 10% discount rate after one year for both options. Use the formula 1/(1+r)", where 'P' is the discount rate and 'n' is the year. Compare NPV and IRR and suggest which option is better for IMC
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