An automotive parts plant is scheduled to be closed in 10 years. Nevertheless, its engineering department thinks that some investments in computer-controlled equipment can be justified by savings in labour and energy costs within that time frame. The engineering department is proposing a four-phase program that would require the expenditure of $100,000 at the beginning of each of the next four years. Each successive phase would produce additional annual savings of $30,000, $27,000, $22,000, and $22,000. The savings from any phase are in addition to annual savings already realized from previous phases. There will be no significant residual value. The firm's cost of capital is 14%. Calculate the IRR of each of the four stages of the cost reduction proposal.

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The Answer of An automotive parts plant is scheduled to be closed in 10 years. Nevertheless, its engineering department thinks that some investments in computer-controlled equipment can be justified by savings in labour and energy costs within that time frame. The engineering department is proposing a four-phase program that would require the expenditure of $100,000 at the beginning of each of the next four years. Each successive phase would produce additional annual savings of $30,000, $27,000, $22,000, and $22,000. The savings from any phase are in addition to annual savings already realized from previous phases. There will be no significant residual value. The firm's cost of capital is 14%. Calculate the IRR of each of the four stages of the cost reduction proposal.

An Automotive Parts Plant Is Scheduled to Be Closed in 10