Newport Corp.is considering the purchase of a new piece of equipment.The cost savings from the equipment would result in an annual increase in cash flow of $200,000.The equipment will have an initial cost of $900,000 and have a 6-year life.There is no salvage value for the equipment.If the hurdle rate is 10%,what is the internal rate of return? Ignore income taxes.(Future Value of $1,Present Value of $1,Future Value Annuity of $1,Present Value Annuity of $1. )(Use appropriate factor from the PV tables.Round your final answer to the nearest dollar amount. )

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is the discount rate that makes the net present value (NPV) of the cash flows equal to zero. By calculating the present value of the annuity of $200,000 over 6 years and comparing it to the initial investment of $900,000, the IRR is found to be between 8% and 10%.