The Koby Company would like to buy equipment to increase production capacity. The equipment costs $336,117.60 and has an estimated useful life of 7 years. The company believes that this investment will generate an additional net cash flow of $56,000 per year.

a) Determine the internal rate of return of this investment.

Do not enter dollar signs or commas in the input boxes.

Round the PV Annuity factor to 4 decimal places.

Round the IRR percentage to the nearest whole number.

PV Annuity Factor:-??

IRR

%- ??

b) Assume the company has a required rate of return of 5%. Using the IRR method, should the company purchase the equipment?

Should the company purchase the equipment?Answer

No

Yes