Question - Kamila Company is considering whether to invest in a machine that requires an investment of $250,000 today. The machine will provide net before-tax cash inflows of $50,000 at the end of each year for ten years, and it will have a salvage value of $70,000 at the end of ten years. For income tax purposes, the machine will be depreciated on a straight-line basis for ten years to a salvage value of $0. Accordingly, when the machine is disposed of for $70,000 at the end of ten years, Kamila Company will have to report a taxable gain. The income tax rate for all items is 30%. All income taxes are paid at the end of the year. Calculate the INTERNAL RATE OF RETURN on the investment in this machine.
12.5%
13.1%
11.7%
11.0%