Elgin Restaurant Supplies is analyzing the purchase of manufacturing equipment that will cost $20,000. The annual cash

Question:

Elgin Restaurant Supplies is analyzing the purchase of manufacturing equipment that will cost $20,000. The annual cash inflows are as follows.

Year ..............Cash flow
1 ..................$10,000
2 ......................9,000
3 ......................6,500

a. Determine the IRR.
b. With a cost of capital of 12 percent, should the machine be purchased?
c. With information from part b, compute the PI.

Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...

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