3. SHOW WORK---(Ignore income taxes in this problem.) The following information

Question

3. SHOW WORK---(Ignore income taxes in this problem.) The following information is available on a new piece of equipment: Cost of the equipment................................. $21,720 Salvage value.............................................. $0 Annual Cash inflows..................................... $5,000 Internal rate of return................................. 16% Required rate of return................................ 10% The life of the equipment is approximately: A. 6 years B. 4.3 years C. 8 years D. It is impossible to determine from the data given.

Explanation / Answer

3. SHOW WORK---(Ignore income taxes in this problem.) The following information is available on a new piece of equipment:

Cost of the equipment................................. $21,720

Salvage value.............................................. $0

Annual Cash inflows..................................... $5,000

Internal rate of return................................. 16%

Required rate of return................................ 10%

The life of the equipment is approximately:

A. 6 years

B. 4.3 years

C. 8 years-100% sure-correct answer

D. It is impossible to determine from the data given.

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