Your company is considering buying a piece of equipment for $5,000

Finance Dec 08, 2020

Your company is considering buying a piece of equipment for $5,000. The equipment is expected to last three years. At the end of each of the three years the cash flow from the equipment is estimated at $2,000. Your company's required rate of return or hurdle rate is 6%.

Showing the calculations and results for Internal Rate of Return Method - should you buy this equipment? How did you make your decision?

Expert Solution

The Internal Rate of Return is 9.70% which is higher than required rate of return You should buy this equiment.

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