Question
The A.M.I. Company is considering installing a new process machine for the firm's manufacturing facility. The machine costs $454,000 installed, will generate additional revenue of
The A.M.I. Company is considering installing a new process machine for the firm's manufacturing facility. The machine costs $454,000 installed, will generate additional revenue of $87,000 per year, and will save $54,000 per year in labor and material costs. The machine will be financed by a $240,000 bank loan repayable in three equal annual installments with a 4% interest rate. The machine will be depreciated using seven-year MACRS. The useful life of the machine is 10 years when the machine will be sold for $26,000. The marginal tax rate is 36%. Compute the IRR of the investment. Enter your answer as a percentage between 0 and 100.
CORRECT ANSWER IS 28.08%
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started