King’s Department Store is contemplating the purchase of a new machine at a cost
ID: 2740949 • Letter: K
Question
King’s Department Store is contemplating the purchase of a new machine at a cost of $26,325. The machine will provide $3,900 per year in cash flow for thirteen years. King’s has a cost of capital of 10 percent. Use Appendix D for an approximate answer but calculate your final answer using the financial calculator method.
What is the internal rate of return? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
King’s Department Store is contemplating the purchase of a new machine at a cost of $26,325. The machine will provide $3,900 per year in cash flow for thirteen years. King’s has a cost of capital of 10 percent. Use Appendix D for an approximate answer but calculate your final answer using the financial calculator method.
Explanation / Answer
Answer : Internal rate of return is 10.997%
As per excel
As per finacial calculator 10.997%
Answer b. Yes, King's deparment should undertaken this project. Because its IRR 10.997% is more than the required return 10%.
Year Cash flow 0 -26325 1 3900 2 3900 3 3900 4 3900 5 3900 6 3900 7 3900 8 3900 9 3900 10 3900 11 3900 12 3900 13 3900 IRR 11%Related Questions
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