Bonita Corporation is involved in the business of injection moulding of plastics. It is considering the purchase of a new computer-aided design and manufacturing machine for $446,100. The company believes that with this new machine it will improve productivity and increase quality, resulting in a $120,700 increase in net annual cash flows for the next five years. Management requires a 14% rate of return on all new investments. Click here to view the factor table. Calculate the internal rate of return on this new machine. (Round answer to 0 decimal places, eg. 10%. For calculation purposes, use 5 decimal places as displayed in the factor table provided, eg 1.52124) Internal rate of return Should management accept the investment? 18.95 % The investment should not be accepted.
Bonita Corporation is involved in the business of injection moulding of plastics. It is considering the purchase of a new computer-aided design and manufacturing machine for $446,100. The company believes that with this new machine it will improve productivity and increase quality, resulting in a $120,700 increase in net annual cash flows for the next five years. Management requires a 14% rate of return on all new investments. Click here to view the factor table. Calculate the internal rate of return on this new machine. (Round answer to 0 decimal places, eg. 10%. For calculation purposes, use 5 decimal places as displayed in the factor table provided, eg 1.52124) Internal rate of return Should management accept the investment? 18.95 % The investment should not be accepted.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Bonita Corporation is involved in the business of injection moulding of plastics. It is considering the purchase of a new computer-aided
design and manufacturing machine for $446,100. The company believes that with this new machine it will improve productivity and
increase quality, resulting in a $120,700 increase in net annual cash flows for the next five years. Management requires a 14% rate of
return on all new investments.
Click here to view the factor table.
Calculate the internal rate of return on this new machine. (Round answer to 0 decimal places, e.g. 10%. For calculation purposes, use 5
decimal places as displayed in the factor table provided, eg. 1.52124)
Internal rate of return
Should management accept the investment?
18.95 %
The investment should not be accepted.
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