Calculate the external rate of return for the investment

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Reference no: EM133578843

Question

Dwight is looking to expand his beet preserving business by investing in a new machine for peeling beets.

Using the machine, he will estimates a yearly revenue of $22820.42 initially and increase each year of $8342.00.

However, he knows that growth cannot continue forever and he estimates his revenue will never exceed $58000.00.

Purchasing the new machine will cost $74923 and require $17983 in maintenance starting in year 1.

The maintenance cost increases by 14.96 percent each year.

In year 15, he expects to salvage the machine for $14163. His TVOM is 14 percent.

a) Calculate the external rate of return for the investment and determine if the investment is justified.

Reference no: EM133578843

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