Evaluate an Investment

Craig is considering whether to add another landscaping location in a growing community west of his current location. Craig has the opportunity to purchase an existing landscaping business for $$2,500,000.$ Once the new community is built and $$set up$$ his business and services will no longer be needed. He believes this location will be viable for $8$ years. Since this will be a major investment he wants to use several methods to evaluate this investment $-$ methods that will consider the time value of money and other methods that do not. He feels this is the best way to get a true picture of whether he should invest.

The new location will generate annual net cash inflows of $$575,000$ for the $8$ years. It is estimated that the facility will remain useful for the full $8$ years and no have no residual value. Craig will use straight$-$line depreciation. Craig wants a payback in less than $5$ years and an ARR of $12\%$ or more Craig may need to obtain a loan, so he will use a $14\%$ hurdle rate on this potential investment.Calculate the IRR:

The internal rate of return is calculated as follows: