Diamond Company Is Considering the Purchase of a New Machine

question 2

Multiple Choice

Diamond Company is considering the purchase of a new machine for $80,000.The machine would generate an annual cash flow of $14,767 for 6 years.At the end of six years, the machine would have no salvage value.The company's cost of capital is 10%.The company uses straight-line depreciation. ​
What is the internal rate of return for the machine rounded to the nearest percent? (Note: Round the discount factor to three decimal places.)

• A) 7%
• B) 9%
• C) 5%
• D) 3%

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Definitions:

Flapping Wings

The movement of wings up and down, characteristic of birds, bats, and some insects, allowing for flight or balance.

Flashing Light

A light that blinks on and off to attract attention or convey a message, commonly used in signaling, warning, or decorative devices.

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The process of watching how others behave and learning from their example.

Insight Learning

A form of problem-solving where the solution comes suddenly and unexpectedly after a period of contemplation, seeing the problem in a new way.