Materials Inc. is considering investing in new excavation equipment for their mining business. The investment will require an outlay of $1,000,000 initially, and is expected to generate the following after-tax cash flows: Year 1, $400,000; Year 2, $700,000; Year 3, $200,000 (due to planned repairs); Year 4, $700,000; Year 5, $850,000 (including the disposal value). The company uses a discount rate of 15%.
What is the Internal Rate of Return (IRR) of the proposed investment? (Use a financial spreadsheet to answer this question.)

Question

Materials Inc. is considering investing in new excavation equipment for their mining business. The investment will require an outlay of $1,000,000 initially, and is expected to generate the following after-tax cash flows: Year 1, $400,000; Year 2, $700,000; Year 3, $200,000 (due to planned repairs); Year 4, $700,000; Year 5, $850,000 (including the disposal value). The company uses a discount rate of 15%. 
What is the Internal Rate of Return (IRR) of the proposed investment? (Use a financial spreadsheet to answer this question.)

Quizplus · Accepted Answer

The Answer of Materials Inc. is considering investing in new excavation equipment for their mining business. The investment will require an outlay of $1,000,000 initially, and is expected to generate the following after-tax cash flows: Year 1, $400,000; Year 2, $700,000; Year 3, $200,000 (due to planned repairs); Year 4, $700,000; Year 5, $850,000 (including the disposal value). The company uses a discount rate of 15%. 
What is the Internal Rate of Return (IRR) of the proposed investment? (Use a financial spreadsheet to answer this question.)