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Use the following information for the Quick Study below. [The following information applies to the questions displayed below.] A company is considering investing in a new machine that requires a cash payment of $38,198 today. The machine will generate annual cash flows of $15,904 for the next three years. QS 24-13 Internal rate of return LO P4 What is the internal rate of return if the company buys this machine? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.)

Respuesta :

Answer:

IRR = 12%

Explanation:

The internal rate of return is the discount rate that equates the after tax cash flows from an investment to the amount invested.

IRR can be calculated using a financial calculator:

Cash flow in year 0 = $-38,198

Cash flow each year from year one to three = $15,904

IRR = 12%

To find the IRR using a financial calacutor:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the IRR button and then press the compute button.

I hope my answer helps you

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