Hogge Print Shop is considering the purchase of a used printing press costing $38,400.The printing press would generate an annual cash flow of $16,000 for three years.At the end of three years, the press would have no salvage value.The company's cost of capital is 10 percent.The company uses straight-line depreciation with no mid-year convention. What is the internal rate of return to the nearest percent for the press, assuming no taxes are paid?

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 from an investment equal to zero. By calculating the IRR for the given cash flows ($16,000 annually for 3 years) and initial investment ($38,400), the IRR is approximately 12%.

Hogge Print Shop Is Considering the Purchase of a Used