(Ignore income taxes in this problem.)Welch Corporation is planning an investment with the following characteristics: The initial cost of the equipment is closest to:

Question

(Ignore income taxes in this problem.)Welch Corporation is planning an investment with the following characteristics:  The initial cost of the equipment is closest to:

Quizplus · Accepted Answer

The internal rate of return is the rate of return at which the net present value of the project is zero.
Net present value = -Investment required + (Net annual cash inflow × Present value factor of an annuity for 6 years at 18%)
$0 = -Investment required + ($45,000 × 3.498)
Investment required = $45,000 × 3.498 = $157,410

(Ignore Income Taxes in This Problem