The Comil Corporation Recently Purchased a New Machine for Its

question 82

Multiple Choice

The Comil Corporation recently purchased a new machine for its factory operations at a cost of $390,875.The investment is expected to generate $125,000 in annual cash flows for a period of five years.The required rate of return is 12%.The old machine has a remaining life of five years.The new machine is expected to have zero value at the end of the five-year period.The disposal value of the old machine at the time of replacement is zero.What is the internal rate of return?

• A) 15%
• B) 16%
• C) 17%
• D) 18%

---

Definitions:

Fixed Manufacturing Overhead

The sum of all the production costs that are not directly linked to the volume of production, such as salaries of managers and depreciation of equipment.

Absorption Costing

A method of costing that includes all manufacturing costs—both fixed and variable—in the cost of a product.

Break-Even

The financial point at which revenues exactly cover all costs, both fixed and variable, representing no profit or loss situation with different wording.

Sales Dollars

The total monetary value of sales within a specific time period.