Taffy industries is considering purchasing equipment costing $60,000 with a 6-year useful life. The equipment will...

Taffy industries is considering purchasing equipment costing $60,000 with a 6-year useful life. The equipment will provide cost savings of $14,600 and will be depreciated straight-line over its useful life with no salvage value. Taffy industries requires a 10% rate of return. What is the approximate internal rate of return for this investment? A). 9% B). 10% C). 11% D) 12%

Expert Solution

At IRR, NPV is $0

Year	Cash flow	× factor@ 12.0%	Present value
0	$ (60,000.00)	1.0000	$ (60,000.00)
1	$ 14,600.00	0.8929	$ 13,035.71
2	$ 14,600.00	0.7972	$ 11,639.03
3	$ 14,600.00	0.7118	$ 10,391.99
4	$ 14,600.00	0.6355	$ 9,278.56
5	$ 14,600.00	0.5674	$ 8,284.43
6	$ 14,600.00	0.5066	$ 7,396.81



			$ -
NPV		4.1114	$ 26.55

At 12% NPV is almost $0.

Answer is 12%

please rate.

ekkarill92 answered 3 years ago

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