ows, net of expenses, by $50,000 per year. The machine would have a five-year useful life and no salvage value.

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Henrie’s Drapery Service is investigating the purchase of a new machine for cleaning and blocking drapes. The machine would cost $171,650, including freight and installation. Henrie’s estimated the new machine would increase the company’s cash inflows, net of expenses, by $50,000 per year. The machine would have a five-year useful life and no salvage value.

Suppose the new machine would increase the company’s annual cash inflows, net of expenses, by only $47,610 per year. Under these conditions, what is the internal rate of return(Round your answer to the nearest whole percentage, i.e. 0.123 should be considered as 12%.)

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