Compute IRR —unequal cash flows (Learning Objective 4)

Ritter Razors is considering an equipment investment that will cost $950,000. Projected net cash inflows over the equipment’s three-year life are as follows: Year 1: $500,000; Year 2: $400,000; and Year 3: $300,000. Ritter wants to know the equipment’s IRR.

Requirements Use trial and error to find the IRR within a 2% range. (Hint: Use Ritter s hurdle rate of 10% to begin the trial-and-error process.)

Optional: Use a business calculator to compute the exact IRR.