Determine the internal rate of return for this investment

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Reference no: EM133342255

Case: Capital Ltd. is considering the purchase of new equipment that will speed up the process for producing disk drives. The equipment will cost $1,196,250 and have a life of five years with no expected salvage value. The expected cash flows associated with the project are below: Year Cash Revenues Cash Expenses 1 $1,150,000 $750,000 2 1,150,000 750,000 3 1,150,000 750,000 4 1,150,000 750,000 5 1,150,000 750,000

a) Determine the internal rate of return for this investment

b) Assume the company has a required rate of return of 16%. Using the IRR method, should the company purchase the equipment?

Reference no: EM133342255

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