The Tool Box needs to purchase a new machine costing $1.46 million.Management is estimating the machine will generate cash inflows of $223,000 the first year and $600,000 for the following three years.If management requires a minimum 12 percent rate of return,should the firm purchase this particular machine? Why or why not?
A)Yes, because the IRR is 10.75 percent
B)Yes, because the IRR is 12.74 percent
C)No, because the IRR is 10.75 percent
D)No, because the IRR is 12.74 percent
E)The answer cannot be determined as there are multiple IRRs

Question

Quizplus · Accepted Answer

The IRR is defined as the interest rate that makes the NPV equal zero. The project should be accepted because the IRR is greater than the required rate.

The Tool Box Needs to Purchase a New Machine Costing