Question: A firm considers to buy a new 3D printer whose cost is $ 46 100. The cost of 3D printer will be paid in 2020.

A firm considers to buy a new 3D printer whose cost is $ 46 100. The cost of 3D printer will be paid in 2020. The expected cash flows of this investment are as follows:

2021: $ 13 200

2022: $ 13 200

2023: $ 13 200

2024: $ 13 200

2025: $ 13 200

The firm plans to sell this 3D printer at the end of 2025 and expects that it can sell the 3D printer in the market for $ 20 000 (the salvage value of the 3D printer is $ 20 000)

a) Find the Internal Rate of Return (IRR) of this project.

b) Given that the current annual interest rate is 15% and the risk premium appropriate for this investment is 5%; should the firm accept or reject this investment.

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