The management of Peregoy Corporation is considering the purchase of an automated molding machine that would cost $255,552, would have a useful life of 5 years, and would have no salvage value. The automated molding machine would result is cash savings of $64,000 per year due to lower labor and other costs.
Required
a. Determine the internal rate of return on the investment in the new automated molding machine. Show your work!
b. If the required rate of return on investments is 12%, is the project acceptable?