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You buy a new plece of equipment for $28,808, and you receve a cash infow of $3,,700 per year for 14 years Use Appendox D for
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Answer #1

IRR can be calculated with the help of a financial calculator by putting below numbers

PV = - 28000 , CF = 3700 , I = ?? , N = 14 and FV = 0

I - 9.5% or IRR = 9.5%

Alternatively, we could have solved IRR manually also

IRR is the rate at which present value of cash outflow = present value of cash inflow

28000 = 3700 * PVIFA (14 , I)

PVIFA( 14 , I) = 9.5667

Solving for I by looking at PVIFA table we would have got I = 9.5%

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