(Ignore income taxes in this problem. )Baber 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. )Baber 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 5 years at 12%)
$0 = -Investment required + ($60, 000 × 3.605)
Investment required = $60, 000 × 3.605 = $216, 300

(Ignore Income Taxes in This Problem