Question
Stockton Lumber is considering the purchase of a new truck fleet. The cost of the new fleet would be $121,332 and they can trade in
Stockton Lumber is considering the purchase of a new truck fleet. The cost of the new fleet would be $121,332 and they can trade in the old fleet for $32,396 immediately (this would reduce the $121,332 cost). Stockton anticipates cash flow from the more efficient fleet to be $21,085 in 2 year(s). $22,951 in 4 years and $49,074 in year 8 after 12 years the trucks will be retired for a total cash flow of $46,766. Find the IRR of the project. Assume quarterly compounding. Use the IRR to determine if Stockton lumber should go-ahead with the new truck project if their cost of capital is 12.25%.
The answer given was 6.2 but I am not sure how to get there.
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