3. year? Would this affect the decision? What does this tell you about OBJECTIVE 1 4 What was the required investment for Goates Company's project? Exercise 14-29 Internal Rate of Return ILLUSTRATING RELATIONSHIPS flows. Each of the following scenarios is independent. Assume that all cash flows are after-tax cash a. Cuenca Company is considering the purchase of new equipment that will speed up the process for producing flash drives. The equipment will cost $7,200,000 and have a life of 5 years with no expected salvage value. The expected cash flows associated with the project follow: Year Cash Revenues Cash Expenses $8,000,000 $6,000,000 8,000,000 6,000,000 8,000,000 6,000,000 8,000,000 6,000,000 8,000,000 6,000,000 b. Kathy Shorts is evaluating an investment in an information system that will save $240,00 per year. She estimates that the system will last 10 years. The system will cost $1,248,000 Her company's cost of capital is 10%. c. Elmo Enterprises just announced that a new plant would be built in Helper, Utah. Elm told its stockholders that the plant has an expected life of 15 years and an expected IR equal to 25%. The cost of building the plant is expected to be $2,880,000. Required: 1. Calculate the IRR for Cuenca Company. The company's cost of capital is 16%. Should new equipment be purchased? 2. Calculate Kathy Short's IRR. Should she acquire the new system? 3. What should be Elmo Enterprises' expected annual cash flow from the plant