Jones Company Is Considering the Purchase of a New Machine

question 28

Multiple Choice

Jones Company is considering the purchase of a new machine for $57,000. The machine would generate an annual cash flow of $17,411 for 5 years. At the end of five years, the machine would have no salvage value. The company's cost of capital is 12%. The company uses straight-line depreciation. What is the internal rate of return for the machine rounded to the nearest percent?

• A) 12%
• B) 18%
• C) 14%
• D) 16%

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Definitions:

General Partners

Individuals in a partnership who are responsible for the management of the partnership, share the profits, and are personally liable for the partnership's debts.

Limited Partnership

A form of partnership consisting of at least one general partner who manages the business and is personally liable for debts, and one or more limited partners who contribute capital and share profits but have limited liabilities.

Control

Control refers to the power to influence or direct people's behavior or the course of events.

Operating Agreement

A legal document outlining the governing procedures and policies of a limited liability company (LLC), including the members' rights, duties, and obligations.