Tidwell Corporation is considering the purchase of a machine costing $18,000. Tidwell estimates that this machine will save $5,000 per year in cash operating expenses for the next five years. If the machine has no salvage value at the end of five years and the discount rate used by Tidwell is 8%, then the machine\'s internal rate of return is closest to:
Solution
Using Excel Formula
Machine\'s internal rate of return = irr(value)
Machine\'s internal rate of return = irr({-18000,5000,5000,5000,5000,5000})
Machine\'s internal rate of return = 12.05%
Answer
Machine\'s internal rate of return is closest to:
C) 12%
.
1. Tidwell Corporation is considering the purchase of a machine costing $18,000. Tidwell estimates
that this machine will save $5,000 per year in cash operating expenses for the next five years. If
the machine has no salvage value at the end of five years and the discount rate used by Tidwell is
8%, then the machine's internal rate of return is closest to:
8%
10%
12%
14%
Solution
Using Excel Formula
Machine's internal rate of return = irr(value)
Machine's internal rate of return = irr({-18000,5000,5000,5000,5000,5000})
Machine's internal rate of return = 12.05%
Answer
Machine's internal rate of return is closest to:
C) 12%
