Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Success Ltd is evaluating whether it should invest today in a equipment that cost $250,000.

With the new machine, the firm projects it will be able to receive $50,000 at the end of every year for the next 6 years. At the end of the 6 years, the company will scrap the machine and does not expect to receive any salvage value for it. The cost of capital for the firm is 9%.

Calculate the internal rate of return (IRR) of this investment. Should the firm purchase the machine? Give your reason(s).

You are to provide the full set of workings that is shown in the lecture notes (PowerPoint slides).

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