Renolds Corporation is considering two alternative investments in excavating equipment. Investment A requires an initial investment of

Question:

Renolds Corporation is considering two alternative investments in excavating equipment. Investment A requires an initial investment of $184,000, has positive cash flows of $27,500 per year, and has an estimated salvage value of $21,000. Investment B requires an initial investment of $234,000, has positive cash flows of $32,800 per year, and has an estimated salvage value of $19,000. Each piece of equipment is expected to have a 12-year useful life. Use a financial calculator to determine the internal rate of return of each project to decide which is more desirable.

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... Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...