Please show work 8 ptX Company is considering buying a new m

Please show work!!

8 ptX Company is considering buying a new machine that will coat $150,000 and that will generate annual cash inflows of $32,450 for 6 years. What is the approximate internal rate of return enter your rate as a decimal; so 1% would be 001 AO 0.03 BO 0.04 CO 0.05 DO 0.06EO 0.07FO 0.08

Solution

5. F 0.08

Internal rate of return is the rate at which Net Present Value is zero.
Further, discount rate and present value of cash flow has adverse relation.It means if discount rate increases, cash flow will be decreased and vice versa.
Step-1:Calculation of Net Present value at 10%
Year	Cash flow		Discount factor	Present Value
a	b		c=1.1^-a		d=b*c
0	$       -1,50,000		1.0000		$       -1,50,000
1	32,450		0.9091		$            29,500
2	32,450		0.8264		$            26,818
3	32,450		0.7513		$            24,380
4	32,450		0.6830		$            22,164
5	32,450		0.6209		$            20,149
6	32,450		0.5645		$            18,317
	Net Present Value			$             -8,672
Step-2:Calculation of Net Present value at 5%
Year	Cash flow		Discount factor	Present Value
a	b		c=1.05^-a		d=b*c
0	$       -1,50,000		1.0000		$       -1,50,000
1	32,450		0.9524		$            30,905
2	32,450		0.9070		$            29,433
3	32,450		0.8638		$            28,032
4	32,450		0.8227		$            26,697
5	32,450		0.7835		$            25,425
6	32,450		0.7462		$            24,215
	Net Present Value			$            14,706
Step-3:Calculation of Internal rate of return
	Intrernal rate of Return	=	5%+(10%-5%)*(14706/(14706-(-)8672)
			=	0.08