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An entrepreneur would like to buy a piece of equipment for his business. The equipment cost...

An entrepreneur would like to buy a piece of equipment for his business. The equipment cost $75,000 and will increase cash flow by $12,000 each year for 15 years. What is his IRR?

13.65%

8.00%

10.92%

12.25%

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Answer #1

Let irr be x%
At irr,present value of inflows=present value of outflows.

75,000=12000/1.0x+12000/1.0x^2+...............+12000/1.0x^15

Hence x=irr=13.65%(Approx).

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