Question

Jacob Elsea, CFO of Colburn Enterprises, is evaluating an opportunity to invest in additional manufacturing equipment that will enable the company to increase its net cash inflows by $200,000 per year. The equipment costs $686,616.20. It is expected to have a five-year useful life and a zero salvage value. Colburn’s cost of capital is 10 percent.

Required
a. Calculate the internal rate of return of the investment opportunity.
b. Indicate whether Colburn should purchase the equipment.



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  • CreatedFebruary 07, 2014
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