Question
Ritter Razors is considering an equipment investment that will cost $955,000. Projected net cash inflows over the equipment's three-year life are as follows: Year 1:
Ritter Razors is considering an equipment investment that will cost $955,000. Projected net cash inflows over the equipment's three-year life are as follows: Year 1: $484,000;Year 2: $402,000; and Year 3: $282,000. Ritter wants to know the equipment's IRR.
Requirement
Use trial and error to find the IRR within a 2% range. (Hint: Use Ritter's hurdle rate of 8% to begin the trial-and-error process.) Use a business calculator or spreadsheet to compute the exact IRR.
Begin by calculating the NPV at three rates: 8%, 10%, and 12%. (Round your answers to the nearest whole dollar. Use parentheses or a minus sign for negative net present values.)
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