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Gamma Electronics Gamma Electronics is considering the purchase of testing equipment that will cost $500,000 to replace old equipment. Assume the new machine will generate after-tax savings of $250,000 per year over the next four years. If Gamma Electronics has a 15% cost of capital, what's the IRR of the investment? 3 a. 23.4% b. 15.0% c. 34.9% d. 100.0%

Gamma Electronics Gamma Electronics is considering the purchase of testing equipment that will cost $500,000 to replace old equipment. Assume the new machine will generate after-tax savings of $250,000 per year over the next four years. If Gamma Electronics has a 15% cost of capital, what's the IRR of the investment? 3 a. 23.4% b. 15.0% c. 34.9% d. 100.0%

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Gamma Electronics Gamma Electronics is considering the purchase of testing equipment that will cost $500,000 to replace old equipment. Assume the new machine will generate after-tax savings of $250,000 per year over the next four years. If Gamma Electronics has a 15% cost of capital, what's the IRR of the investment? 3 a. 23.4% b. 15.0% c. 34.9% d. 100.0%
Transcribed Image Text:Gamma Electronics Gamma Electronics is considering the purchase of testing equipment that will cost $500,000 to replace old equipment. Assume the new machine will generate after-tax savings of $250,000 per year over the next four years. If Gamma Electronics has a 15% cost of capital, what's the IRR of the investment? 3 a. 23.4% b. 15.0% c. 34.9% d. 100.0%
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