Question
Nancy's Notions pays a delivery firm to distribute its products in the metro area. Delivery costs are $28,000 per year. Nancy can buy a used
Nancy's Notions pays a delivery firm to distribute its products in the metro area. Delivery costs are $28,000 per year. Nancy can buy a used truck for $7,000 that will be adequate for the next 3 years. Operating and maintenance costs are estimated to be $21,000 per year. At the end of 3 years, the used truck will have an estimated salvage value of $4,000. Nancy's MARR is 19%/year. a. What is this investment's internal rate of return? IRR = b. What is the decision rule for judging the attractiveness of investments based on internal rate of return? c. Should Nancy buy the truck?
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