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Determining the IRR in the given case

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Booster Labs is considering acquiring new equipment that management estimates will reduce its cash operating expenses by $50,000 each year for the next five years. After five years, the company believes the equipment will be technologically obsolete and will have no salvage value. The equipment will cost $180,000 and the company will have to spend $20,000 immediately to train its staff to use the new equipment.

What is the internal rate of return of this investment project?

a) 25%
b) 12%
c) 8%
d) 5%

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Please refer attached file for better understanding of formulas in MS Excel.

Initial Cash outflow = (cost of machine+training ...

Solution Summary

The solution determines the IRR in the given case.

$2.19