Question

A company is considering investing in a new machine that requires an initial investment of $43,158. The machine will generate annual net cash flows of $17,050 for the next three years. What is the internal rate of return of this machine

Answer 1

$9.001% is the  internal rate of return of this machine. as the initial investment of $43,158.

What is internal rate of return?

The internal rate of return is the cost of borrowing at which the aggregate of all cash flows equals zero, and it is being used to analyze one investment to another.

If the person change 8% with 13.92% in the given example, the NPV becomes 0, and the IRR becomes zero. As a result, IRR is defined as the discount rate at which a project's net present value becomes zero.

Thus, $9.001% is the internal rate of return.

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