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5 July, 05:03

Soda Manufacturing Company provides vending machines for soft-drink manufacturers. The company has been investigating a new piece of machinery for its production department. The old equipment has a remaining life of four years and the new equipment has a value of $91,110 with a four-year life. The expected additional cash inflows are $30,000 per year. What is the internal rate of return? A) 12% B) 16% C) 10% D) 8%

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  1. 5 July, 08:27
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    A) 12%

    Explanation:

    You can solve this question using a financial calculator. I am using (Texas Instruments BA II plus)

    Note: use the "CF" button

    CF0 = - 91,110

    From here onwards, press down arrow twice before keying in the next cashflow;

    C01 = 30,000

    C02 = 30,000

    C03 = 30,000

    C04 = 30,000

    Press IRR, CPT = 12.005%

    Therefore, IRR = 12%
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