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(Ignore income taxes in this problem


(Ignore income taxes in this problem.) Allen Company's required rate of return is 14%. The company is considering the purchase of a new machine that will save $10,000 per year in cash operating costs. The machine will cost $40,000 and will have an 8-year useful life with zero salvage value. Straight-line depreciation will be used.

What is the machine's internal rate of return to the nearest whole percent?

Would you recommend purchase of the machine? Explain.

Option 1

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Option 2

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