Eisler Corporation is involved in the business of injection molding of plastics.

Question

Eisler Corporation is involved in the business of injection molding of plastics. It is considering the purchase of a new computer-aided design and manufacturing machine for $425,400. The company believes that with this new machine it will improve productivity and increase quality, resulting in an increase in net annual cash flows of $100,555 for the next 6 years. Management requires a 10% rate of return on all new investments.

A) Calculate the internal rate of return on this new machine. (Round answer to 0 decimal places, e.g. 10.)
B) Should the investment be accepted?

Explanation / Answer

12543.17

Year Cash Inflows PV Factor Amount 0 -425400 -425400 1 100555 0.90909 91413.54 2 100555 0.82645 83103.68 3 100555 0.75132 75548.98 4 100555 0.68301 68680.07 5 100555 0.62092 62436.61 6 100555 0.56447 56760.28 As the NPv is positive the proposal should be accepted. NPV

12543.17

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