Home Security Systems is analyzing the purchase of manufacturing equipment that

Question

Home Security Systems is analyzing the purchase of manufacturing equipment that will cost $58,000. The annual cash inflows for the next three years will be:

Determine the internal rate of return using interpolation. Use Appendix D. (Round "PV Factor" and intermediate to 3 decimal places. Round final answer to 2 decimal places. Omit the "%" sign in your response.)

Home Security Systems is analyzing the purchase of manufacturing equipment that will cost $58,000. The annual cash inflows for the next three years will be:

Explanation / Answer

Investment = 58,000
Annuity = 29000+27000+22000 / 3 = 26000
Time = 3 years

IRR = Investment / Annuity
= 58,000 / 26000
= 2.23
PVIF of 2.23 for 3 years is 16%

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