Time remaining 02210 Ignore Income taxes in this problem Cro

Time remaining 0:2210 (Ignore Income taxes in this problem.) Crockin Corporation is considering a machine that will save $14,000 a year in cash operating costs each year for the next stx years. At the end of stx years it would have no salvage value. If this machine costs $55,972 now, the machine\'s internal rate of return is closest to: Click here to view Exhibt 8B.1 and Exhibit 8B-2 to determine the appropriate discount factoris) using tables 017% 012% 013% o 14% 3:06 PM 7/15/2018

Solution

I have calculated the IRR by guessing the rate of return equal to 13%.

Annual savings =14000

IRR is the rate at which present value of inflow is equal to initial outflow.

Initial outflow =PV of inflow

55972=14000*PVAF

PVAF =3.998 at 13% for 6 years Present value annuity factor is 3.998.