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.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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please solve using the IRR formula.
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.
Transcribed Image Text:please solve using the IRR formula. 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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