Question #2 (15 marks) The Hammerlink Company has been offered an special-purpose metal-cutting machine for...
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Question #2 (15 marks) The Hammerlink Company has been offered an special-purpose metal-cutting machine for $110,000. The machine is expected to have a useful life of eight years with a terminal disposal price of $30,000. Savings in cash operating costs are expected to be $25,000 per year. However, additional working capital is needed to keep the machine running efficiently and without stoppages. Working capital includes such items as filters, lubricants, bearings, abrasives, flexible exhaust pipes, and belts. These items must continually be replaced so that an investment of $8,000 must be maintained in them at all time, but this investment is fully recoverable (will be Ucashed in") at the end of the useful life. Hammerlink's required rate of return is 14%. Required: 2. (b) Compute the internal rate of return (round to 2 decimal places).
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