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John's Arcade: Internal Rate of Return of the simulator

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John's Arcade is planning on purchasing a virtual reality simulator for $ 210,000. The simulator estimated services life is seven year with a residual value of $25,000. The simulator is expected to bring in $40,000 per year after expenses. Compute the internal rate of return on the simulator. If John wanted to get a 13% internal rate of return, what would the annual cash flows need to be in order generate this rate of return?

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Solution Summary

This solution provides steps to determine the annual cash flows needed.

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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