You are the executive of a large company who is being asked to approve the acquisition of a new large piece of factory equipment. The initial outlay of money for the piece of equipment is $100,000. The net cash flows for the subsequent 10 years are $16,000 per year. What is the Net Present Value for acquiring the piece of equipment if the discount rate is 9%?

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 $(100,000) $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 Discount Rate = 9.0%

Using the same data from question 1, what is the IRR of acquiring the piece of equipment?

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 $(100,000) $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000 $16,000