Internal rate of return-would you accept or reject project

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Reference no: EM131532617

Assume Keurig Inc is evaluating whether or not to purchase a piece of equipment that will involve an initial outlay or cost of $1 million. Assume a production of a new product line will begin 6 months following installation and will yield the following estimated Operating Cash Flows per year for the following years listed in Table 2 below:

Table 2

Year 1 $30,000

Year 2 $120,000

Year 3 $410,000

Year 4 $500,000

Year 5 $600,000

Year 6 $450,000

Year 7 $400,000

In addition…

At the end of Year 7, the equipment will be sold for an after tax terminal value of $10,000.

Assume the wacc=12%

A) What is the Internal Rate of Return (IRR)? ___________

B) Would you accept or reject the project?______________

C) Explain why or why not______

Reference no: EM131532617

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