An investment that costs $200,000 will reduce operating costs by $35,000 per year for 12 years....

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An investment that costs $200,000 will reduce operating costs by $35,000 per year for 12 years....

An investment that costs $200,000 will reduce operating costs by $35,000 per year for 12 years. Determine the internal rate of return of the investment (ignore taxes). Should the investment be undertaken if the required rate of return is 18 percent. Can yall show me the steps to find this.

business accounting

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Answer 1

Answer #1

YEAR	CASH FLOW	PV FACTOR (18%)	PV OF CASH FLOW
0	(200000)	1	(200000)
1-12	35000	4.79322	167763
NPV			(32237)

SINCE NET PRESENT VALUE IS NEGATIVE , THE INVESTMENT SHOULD NOT BE UNDERTAKEN.

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Answer 2

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An investment that costs $200,000 will reduce operating costs by $35,000 per year for 12 years....

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