The internal rate of return method

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A piece of equipment requires an initial capital investment of $8,000. The equipment has an estimated life of 10 years, no salvage value, annual revenues of $5,600, and annual expenses of $3,200. The MARR for the company is 18% before income taxes.

a. Using the annual worth (AW) method, determine whether purchasing the equipment is economically justified.

b. Repeat part (a) using the internal rate of return (IRR) method.

c. Using the present worth (PW) method, determine the break-even time period after which purchase of the equipment generates a profit. (Find N when PW = 0)

Reference no: EM131910386

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