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%