In a construction job that is expected to last 4 years, a conveyor with a cost of $ 10,000 is proposed as an alternative for handling materials; with annual operating expenses of $ 7,000. The analyst estimates that the recovery value, after two years, will be $ 4,000. As an alternative, the contractor is in a position to outsource all material handling work for $ 1,500 per year paid in advance. He determines which alternative is the viable one by the internal rate of return method, considering that the investor works with a required minimum rate of return of 12%.

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To determine which alternative is viable using the internal rate of return IRR method we need to cal... View the full answer