12-8 You buy a new piece of equipment for $16, 980, and you receive a cash inflow of $3, 000 per year for 12 years. What is the internal rate of return? Solution: Appendix D $16980 PVIEA =5.660 IRR 14% For n=12. we find 5.660 under the 14% column Warner Business Products is considering the purchase of a new machine at a cost of$11,070. The machine will provide $2,000 per year in cash flow for eight years. Warner's cost of capital is 13 percent. Using the internal rate of return method, evaluate this project and indicate whether it should be Solution: Warner business products Appendix d PⅤIFA=$11,070/$2,000=5535 IRR 9% For n =8. we find 5,353 under the 9% column The machine should not be purchased since its return is under 13 percei CopyrightC 2005 by The McGray-Hill Companies, Inc. S-430Copyright © 2005 by The McGraw-Hill Companies, Inc. S-430 12-8. You buy a new piece of equipment for $16,980, and you receive a cash inflow of $3,000 per year for 12 years. What is the internal rate of return? Solution: Appendix D PVIFA = 5.660 $3,000 $16,980 = IRR = 14% For n = 12, we find 5.660 under the 14% column. 12-9. Warner Business Products is considering the purchase of a new machine at a cost of $11,070. The machine will provide $2,000 per year in cash flow for eight years. Warner’s cost of capital is 13 percent. Using the internal rate of return method, evaluate this project and indicate whether it should be undertaken. Solution: Warner Business Products Appendix D PVIFA = $11,070/$2,000 = 5.535 IRR = 9% For n = 8, we find 5.353 under the 9% column. The machine should not be purchased since its return is under 13 percent