Brew Ltd$.$ introduced a new product, DV$,$ to its range last year. The machine used to mould each item is a bottleneck in the production process meaning that a maximum of $5,000$ units per annum can be manufactured.

Year $0$

$$000$

Year $1$

$$000$

Year $2$

$$000$

Year $3$

$$000$

Year $4$

$$000$

Investment

$(20)$

Income

$65$

$155$

$200$

$(20)$

Operating Cost

$(71)$

$(127)$

$(155)$

$(15)$

No terminal value or machinery scrap value is expected at the end of four years, when production of DV is planned to end. For investment appraisal purposes, Brew Ltd$.$uses a nominal $($money$)$ discount rate of $10\%$per year and $20\%.$ Calculate the IRR

Question $1$Answer

a$.$

$28\mathrm{.}5\%$

b$.$

$20\mathrm{.}5\%$

c$.$

$27\mathrm{.}5\%$