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What is the approximate internal rate of return of buying it

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Reference no: EM133169271

Question - X Company is considering the purchase of a new machine. The machine would reduce the amount of part-time labor, at a cost savings of $15,415 per year. In addition, the machine would enable the company to increase production and sales of one of its products by 2,400 units; contribution margin of this product is $5.50 per unit. The machine would cost $150,000, last for five years, and have zero salvage value at the end of its life.

Required -

a. Assuming a discount rate of 8%, what is the net present value of buying the new machine?

b. If the new machine will last for six years instead of five, what is the approximate internal rate of return of buying it?

Reference no: EM133169271

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