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Proposal: Equipment costing $180,000 is being evaluated for a production process. The expected benefit per year is $13500 and the estimated salvage value is $60000 Determine the rate of return the company can get in this proposal if the expected equipment life is 20 years

Respuesta :

Answer:

5.61%

Explanation:

Rate of return can be calculated by finding the IRR.

IRR is the discount rate that equates the after tax cash flows from an investment to the amount invested.

IRR can be calculated using a financial calculator.

Cash flow in year zero = $-180,000 

Cash flow each year from year one to nineteen = $13,500

Cash flow in year twenty = $13500 + $60,000 = $73,500

IRR = 5.61%

To find the IRR using a financial calacutor:

1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.

2. After inputting all the cash flows, press the IRR button and then press the compute button.

I hope my answer helps you

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