IRR and tolerable error Vigley Company is evaluating the acquisition of equipment with a cost of $60,000, no salvage value, and an 8-year life. The expected cash flow from using the equipment is $14,260 per year. The company evaluates projects using the IRR method and accepts those whose IRR is at least 15 percent.

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REQUIRED a. Compute the internal rate of return on the investment. b. Determine the magnitude of error in the estimate of cash inflows that the company can tolerate on the project.