An investment of $100,000 is required in an existing manufacturing concern, whose annual revenue is expected to

Question:

An investment of $100,000 is required in an existing manufacturing concern, whose annual revenue is expected to be $40,000 for the next five years. Out of this revenue, the yearly expenditure on maintenance is $4,000. The of additional equipment installed is zero after five years. The company is willing to increase investment if the minimum rate of return is 10%. Using the IRR, determine whether the investment is desirable.
Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...