(Ignore income taxes in this problem.) Valdivieso Roofing is considering the purchase of a crane that would cost $137,885, would have a useful life of 9 years, and would have no salvage value. The use of the crane would result in labor savings of $23,000 per year. The internal rate of return on the investment in the crane is closest to:

Question

Quizplus · Accepted Answer

The internal rate of return (IRR) is the discount rate that makes the net present value (NPV) of the investment zero. By calculating the IRR for the given cash flows (initial cost of $137,885 and annual savings of $23,000 for 9 years), the IRR is closest to 9%.

(Ignore Income Taxes in This Problem