Explain your answer.

2. Assume Keurig Inc is evaluating whether or not to purchase a piece of equipment that will involve an initial outlay or cost of $1 million. Assume a production of a new product line will begin 6 months following installation and will yield the following estimated Operating Cash Flows per year for the following years listed in Table 2 below:

Table 2

Year 1

$30,000

Year 2

$120,000

Year 3

$410,000

Year 4

$500,000

Year 5

$600,000

Year 6

$450,000

Year 7

$400,000

In addition

At the end of Year 7, the equipment will be sold for an after tax terminal value of $10,000.

Assume the wacc=12%

A) What is the Internal Rate of Return (IRR)? ___________

B) Would you accept or reject the project?______________

C) Explain why or why not______