Excel Analytics 14-1 (Algo) Internal Rate of Return [LO14-2, LO14-3]

Excel Analytics 14-1 (Algo) Internal Rate of Return [LO14-2, LO14-3] Sacco 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 $125,000 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 outofpocket operating costs $193,000 Required: 1. One method for computing the internal rate of return relies on computing the factor ofthe internal rate of return as shown below: Factor of the internal rate Investment required of return Annual net cash inflow Can this equation be used to calculate the internal rate of return for Sacco Company? Why? Complete this question by entering your answers in the tabs below. Req 1A Req lB Which of the following statements is true with respect to this equation? Olt can be used to calculate the internal rate of return in this instance because the net cash inows are the same every year. . It cannot be used to calculate the internal rate of return in this instance because the net cash inows are not the same every year. 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 Investment required of return Annual net cash inflow Can this equation be used to calculate the internal rate of return for Sacco Company? Why? Complete this question by entering your answers in the tabs below. Req 1A Req 1B 1b. If this equation cannot be used to calculate the internal rate of return explain why. Because the net cash inflows are the same every year. Because the net cash inflows are not the same every year