申論題

Problem 2 [20%]
L Inbee Corporation is considering the acquisition of a new honey dipping machine that costs $595,000. The machine is expected to have a five-year service life and will help Inbee for annual savings in cash operating costs of $170,000. Inbee uses the sum-of-the-years'-digits method of depreciation and depreciates the asset over its five-year service life. Inbee Corporation is subject to a 25% income tax rate and has an after-tax hurdle rate of 12%.
 Required:

(1) Calculate the internal rate of return for the investment in new machine. (5 points) Whether Inbee should invest in the new machine based on the internal rate of return method? Explain. (5 points)