Reference no: EM132777222
Question - A machine that cost $18000 is expected to operate for 10 years. The estimated salvage value at the end of 10 years is $0. The machine is expected to save the company $1,200 per year before taxes and depreciation. The company depreciates its assets on a straight-line basis and has a marginal tax rate of 40 percent.
A: What is the internal rate of return on this investment?
B: Assuming the firm requires a 4% required rate of return on similar investments, should the firm adopt the project and why?
THESE ARE THE MULTIPLE CHOICE CHOICES
1. No, it should not be adopted because it as a negative IRR and a lower IRR than its required rate of return
2. Yes, they should adopt it since it reduces expenses
3. Yes, they should adopt it since the NINV is so low
4. No, it should not be adopted because it does not increase revenue.
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