Splish Brothers, Inc. is considering purchasing equipment
costing $76000 with a 6-year useful life. The equipment will
provide annual cost savings of $18487 and will be depreciated
straight-line over its useful life with no salvage value. Splish
Brothers requires a 10% rate of return.
Present Value of an Annuity of 1 | ||||||
Period | 8% | 9% | 10% | 11% | 12% | 15% |
6 | 4.623 | 4.486 | 4.355 | 4.231 | 4.111 | 3.784 |
What is the approximate internal rate of return for this
investment?
9%
10%
11%
12%
12%
At IRR, Present value of cash inflow = Present value of cash outflow
18487*X = 76000
X = 4.111
Hence, IRR = 12%
Splish Brothers, Inc. is considering purchasing equipment costing $76000 with a 6-year useful life. The equipment...
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