3. Calculate the internal rate of return for a machine that costs $550,000 and provides annual revenue of $125,000 per year for 5 years. You can assume all revenue is received once a year at the end of the year. a. Compare the IRR to the interest rate on a loan to fund the machine cost at 5.3%. Based on this information should you take on a loan to purchase this machine. Justify your answer.
3. Calculate the internal rate of return for a machine that costs $550,000 and provides annual revenue of $125,000 per year for 5 years. You can assume all revenue is received once a year at the end of the year. a. Compare the IRR to the interest rate on a loan to fund the machine cost at 5.3%. Based on this information should you take on a loan to purchase this machine. Justify your answer.
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 5PB: Mason, Inc., is considering the purchase of a patent that has a cost of $85000 and an estimated...
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![3. Calculate the internal rate of return for a machine that costs $550,000 and provides
annual revenue of $125,000 per year for 5 years. You can assume all revenue is received
once a year at the end of the year.
a. Compare the IRR to the interest rate on a loan to fund the machine cost at 5.3%.
Based on this information should you take on a loan to purchase this machine.
Justify your answer.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Faf5122a9-e3d5-45fc-976d-a3e29f5f7537%2F7042d3ff-66c5-4756-87f6-c90586937def%2Fdvelm8c_processed.jpeg&w=3840&q=75)
Transcribed Image Text:3. Calculate the internal rate of return for a machine that costs $550,000 and provides
annual revenue of $125,000 per year for 5 years. You can assume all revenue is received
once a year at the end of the year.
a. Compare the IRR to the interest rate on a loan to fund the machine cost at 5.3%.
Based on this information should you take on a loan to purchase this machine.
Justify your answer.
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