Springer Company Is Considering the Purchase of a New Machine

question 44

Multiple Choice

Springer Company is considering the purchase of a new machine for $80,000.The machine would generate an annual cash flow before depreciation and taxes of $28,778 for five years.At the end of five years, the machine would have no salvage value.The company's cost of capital is 12 percent.The company uses straight-line depreciation with no mid-year convention and has a 40 percent tax rate. What is the internal rate of return for the machine rounded to the nearest percent?

• A) below 12%
• B) between 12 and 14%
• C) between 14 and 16%
• D) between 16 and 18%

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Definitions:

Verbal Communication

The use of spoken or written words to convey messages, ideas, or feelings.

Circumstance

A condition or fact that affects a situation, event, or action.

Low-context Cultures

Cultures where communication is explicit, and understanding does not heavily rely on contextual cues.

Time

The indefinite continued progress of existence and events in the past, present, and future regarded as a whole.