Eisner Company has an opportunity to manufacture and sell a new product for a five-year period. The company estimated the following costs and revenues for the new product:

Cost of new equipment	$	420,000
Initial working capital required	$	130,000
Overhaul of the equipment after three years	$	50,000
Salvage value of the equipment after five years	$	30,000

Annual revenues and costs:

Sales	$	850,000
Variable expenses	$	500,000
Fixed out-of-pocket operating costs	$	192,000

When the project concludes in five years the working capital will be released for investment elsewhere in the company.

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rev: 05_07_2020_QC_CS-210952, 01_11_2021_QC_CS-246235

Excel Analytics 14-1 (Algo) Part 1

Required:
1. One method for computing the internal rate of return relies on computing the factor of the internal rate of return as shown below:

Factor of the internal rate of return	=	Investment required
		Annual net cash inflow

Can this equation be used to calculate the internal rate of return for Eisner Company? Why?