A company is considering buying a new piece of machinery that costs $8M and has a salvage value of $1.5M at the end of its 10-year useful life. The machinery nets $2.3M per year in annual revenues. MARR = 10%. The internal rate of return (IRR) on this investment is approximately _____________.
| Year | Cash flow |
| 0 | -8000000 |
| 1 | 2300000 |
| 2 | 2300000 |
| 3 | 2300000 |
| 4 | 2300000 |
| 5 | 2300000 |
| 6 | 2300000 |
| 7 | 2300000 |
| 8 | 2300000 |
| 9 | 2300000 |
| 10 | 3800000 |
| 26.48% |
IRR on this investment is approximate 26.48%
Formula:
| Year | Cash flow |
| 0 | -8000000 |
| 1 | 2300000 |
| 2 | 2300000 |
| 3 | 2300000 |
| 4 | 2300000 |
| 5 | 2300000 |
| 6 | 2300000 |
| 7 | 2300000 |
| 8 | 2300000 |
| 9 | 2300000 |
| 10 | 3800000 |
| =IRR(B2:B12) |
A company is considering buying a new piece of machinery that costs $8M and has a...