Question

A company purchased now for $20,000 will lose $1,000 each year for the first 4 years....

A company purchased now for $20,000 will lose $1,000 each year for the first 4 years. An additional $10,000 invested in the company during the 6th year will result in a profit of $5,000 each year from the 6th year through the 12th year. At the end of 12 years, the company can be sold for $30,000. Use the IRR method to determine the economic viability of this investment. MARR is 12%.

manual solution (no excel) with cash flow diagram

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Answer #1

SOLUTION:-

Based on the given data, pls find below the steps, workings and answer:

The IRR of this Project is 8.01% which is lower than that of the MARR of 12%; Hence, this company is not viable economically.

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