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Calculate the internal rate of return

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Reference no: EM131411807

Darrin Corporation is considering a proposal to purchase a new piece of equipment. The cost of the equipment is $16,611. The equipment is estimated to provide an annual cash flow of $3,000 for the next nine years. The company has a required rate of return of 15%. Calculate the internal rate of return (IRR), and interpret the results. Use the present value of an annuity table.

  • Since the IRR is lesser than the required rate of return, the proposal should be rejected.

  • Since the capital investment is higher than $15,000, the proposal should be rejected.

  • Since the IRR is greater than the required rate of return, the proposal should be accepted.

  • Since the cash flows are evenly distributed, the proposal should be accepted

Reference no: EM131411807

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