Question

a. wna b. Wha basc c. Sho 6. Carlisle Company has been cited and must invest in equipment to reduce stack emissions or face EPA fines of $18,500 per year. An emission reduction filter will cost $75,000 and have an expected life of 5 years, Carlisle's MARR is 10%/yr. a. What is the internal rate of return of this investment? b. What is the decision rule for judging the attractiveness of investments based on internal rate of return? c. Is the filter economically justified? 10. A des will proje

please dont use excel write down all the steps and explanation

Answer 1

If you are not allowing us to use excel, we have to necessarily use the financial calculator, because there is no oter method on this planet earth to calculate IRR.

Part (a)

We have to calculate the IRR. We will use the financial calculator with the following input:

PV = 75,000; n = 5; PMT = 18,500; FV = 0; I/Y = ???

Please feed these values in the calculator to calculate I/Y = 7.42%

Hence, the IRR = 7.42%

Part (b)

An investment decision is attractive if IRR > MARR or cost of capital

Part (c)

IRR = 7.42% < 10% = MARR; hence the filter is not justified economically.