Compute the actual internal rate of return

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Reference no: EM131374480

Sonar warning devices are being purchased by the St. James department store chain to help trucks back up at store loading docks. Tbe total cost of purchase and installation is £220 000. There are two types of saving from the system. Faster turnaround time at the congested loading docks will save £50 000 per year in today's pounds.

Reduced damage to the loading docks will save £30 000 per year in today's pounds. St. James has an observed actual pound MARR of 18%. The sonar system has a life of four years. Its scrap value in today's pounds is £20 000. The inflation rate is expected to be 6% per year over the next four years.

(a) Wha t is St. James's real MARR?

(b) What is the real internal rate of return? (This is most easily done with a spreadsheet.)

(d) Compute the actual internal rate of return from the actual pound cash flows. (This is most easily done with a spreadsheet.)

(e) Wha t is the present worth of the system?

Reference no: EM131374480

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