Boyer Cosmetics is planning to expand its product line to include stage makeup. The expansion will require

Question:

Boyer Cosmetics is planning to expand its product line to include stage makeup. The expansion will require the company to purchase special mixing equipment at a cost of $125,532. The equipment will have a useful life of 16 years.

Required

a. If Boyer uses a 12% hurdle rate, what is the minimum annual net cash inflow required to make this project acceptable under the internal rate of return method?

b. If Boyer estimates that the new product line will generate $16,000 in additional annual net cash inflow, is the project acceptable given the company's 12% hurdle rate? Why or why not?

Internal Rate of Return
Internal Rate of Return of IRR is a capital budgeting tool that is used to assess the viability of an investment opportunity. IRR is the true rate of return that a project is capable of generating. It is a metric that tells you about the investment...