Question: Jacob Elsea CFO of Colburn Enterprises is evaluating an opportunity

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.

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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