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Community Health Center (CHC) is considering spending $50,000 on a blood analyzer. The annual cash profits from the machine will be $7,000 for each of

Community Health Center (CHC) is considering spending $50,000 on a

blood analyzer. The annual cash profits from the machine will be $7,000 for

each of the 7 years of its useful life. The board of directors wants to pursue

this investment, because they think the $49,000 CHC will receive is close to

the $50,000 cost. What is wrong with the board's logic? What is the IRR on

the investment?

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