(Ignore income taxes in this problem.) Duhl Long-Haul, Inc., is considering the

Question

(Ignore income taxes in this problem.) Duhl Long-Haul, Inc., is considering the purchase of a tractor-trailer that would cost $126,175, would have a useful life of 5 years, and would have no salvage value. The tractor-trailer would be used in the company's hauling business, resulting in additional net cash inflows of $35,000 per year. The internal rate of return on the investment in the tractor-trailer is closest to:




a. 10%

b. 15%

c. 13%

d. 12%

Explanation / Answer

CF = $35,000 => 126,175 = $35,000/(1+r) +$35,000/(1+r)^2 + $35,000/(1+r)^3 + $35,000/(1+r)^4 + $35,000/(1+r)^5 solving for r, r= 12.00% => IRR=12.00%

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