Scotia Family Health Team is investigating purchasing an ultrasound machine for use in its patient clinic. The machine would cost $133,800, including invoice cost, freight, and the training of employees to operate it. Scotia has estimated that the new machine would increase the company's cash flows, net of expenses, by $25,000 per year. The machine would have a twenty-year useful life with no expected salvage value. (Ignore income taxes.)
(Hint: Use Microsoft Excel to calculate the discount factor(s).)
Required:
1. Compute the machine's IRR. (Do not round intermediate calculations and round your final answer to nearest whole number.)
2. Compute the machine's net present value. Use a discount rate of 18%. (Do not round intermediate calculations and round your final answer to the nearest dollar amount.)
3. Suppose that the new machine would increase the company's annual cash flows, net of expenses, by only $21,300 per year. Under these conditions, compute the internal rate of return. (Do not round intermediate calculations and round your final answer to nearest whole number.)