Performance Needlework needs to purchase a new machine costing $1.25 million. Management is estimating the machine will generate cash inflows of $175,000 the first year and $500,000 for the following three years. If management requires a minimum 10 percent rate of return, should the firm purchase this particular machine based on its IRR? Why or why not?

The project should be accepted because its IRR is higher than 10%.

Explanation:

initial outlay = $1,250,000

NCF1 = $175,000

NCF2 = $500,000

NCF3 = $500,000

NCF4 = $500,000

NPV = -$1,250,000 + $175,000/1.1 + $500,000/1.1² + $500,000/1.1³ + $500,000/1.1⁴ = $39,478.18

IRR = 11.28% ≥ 10%, so the project should be accepted

We can tell that the project's IRR will be higher than 10% (discount rate) because its NPV is positive. The IRR is the discount rate at which a project's NOV = 0.

odd consecutive integers are odd integers that follow each other. they have a difference of 2 between every two numbers. if n is an odd integer, then n, n+2, n+4 and n+6 will be odd consecutive integers. the first number in the pattern is always the variable on its own or in this case, "n". examples.

these are the four factors that influence enterpreneurship development

1. economic development

2. culture

3.technological development

4. education