The Company has an opportunity to purchase updated peeling equipment for $250,000. The new equipment will lower its direct labor costs related to cider production by 10%. The machine has a useful life of 5 years. Cider unit sales are projected to increase by 5% per year for the next five years. What is the Internal rate of return for this project? Assume the Company's cost of capital is 12%. Should it make this investment? Would your answer change if the equipment had a salvage value of 10% of its original cost at the end of 5 years?

The Cider Mill Solution: Budget Si D In Tc PI C1