Question
Kadalai Company makes metal blanks which it sells to metal fabrication and stamping companies. The sales forecasts for the next four years are 415,000 bars
Kadalai Company makes metal blanks which it sells to metal fabrication and stamping companies. The sales forecasts for the next four years are 415,000 bars a year. The president estimates that he can save $2,100 per year in fixed cash operating costs plus $0.05/bar during the next four years if he buys a machine to automate the process at a cost of $79,000. A salvage value of $15,400 is expected at the end of the four-year period. The companys minimum desired rate of return is 9%. The companys average tax rate is 20%. |
Click here to view Exhibit 10-1 and Exhibit 10-2, to determine the appropriate discount factor(s) using tables. |
Required: |
What is the internal rate of return for the investment in the machine? (Round discount factor(s) to 3 decimal places and final answer to 2 decimal places. (i.e., 0.1234 should be considered as 12.34%).) |
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