Humphrey, Inc. is considering purchasing equipment costing $30,000 with a 6-year useful life. The equipment will provide cost savings of $7,300 and will be depreciated straight-line over its useful life with no salvage value. Humphrey, Inc. requires a 10% rate of return. What is the approximate internal rate of return for this investment?

Question

Humphrey, Inc. is considering purchasing equipment costing $30,000 with a 6-year useful life. The equipment will provide cost savings of $7,300 and will be depreciated straight-line over its useful life with no salvage value. Humphrey, Inc. requires a 10% rate of return.  What is the approximate internal rate of return for this investment?

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The Answer of Humphrey, Inc. is considering purchasing equipment costing $30,000 with a 6-year useful life. The equipment will provide cost savings of $7,300 and will be depreciated straight-line over its useful life with no salvage value. Humphrey, Inc. requires a 10% rate of return.  What is the approximate internal rate of return for this investment?