King’s Department Store is considering the purchase of a new machine at a cost o

Question

King’s Department Store is considering the purchase of a new machine at a cost of $29,929. The machine will provide $4,400 per year in cash flow for nine years. King’s has a cost of capital is 11 percent.

USE FINNANCIAL CALCULATOR!!!!

What is the IRR? (Use a Financial calculator to arrive at the answers. Round the final answer to the nearest whole percent.)

King’s Department Store is considering the purchase of a new machine at a cost of $29,929. The machine will provide $4,400 per year in cash flow for nine years. King’s has a cost of capital is 11 percent.

Explanation / Answer

In the financial calculator, input the cashflows as shown below:

Press the IRR key and CPT key to get the IRR Value = 5.998807% = 6%

Year Cashflows 0 -29929 1 4400 2 4400 3 4400 4 4400 5 4400 6 4400 7 4400 8 4400 9 4400

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