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Rate of return (IRR)

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1. (Part A - You are considering an upgrade at a chip manufacturing plant. A new VLSI testing station costs $100,000, installed. It will save $50,000 per year in labor costs. Use five-year tax life and a tax rate of 40%. Find the rate of return (IRR). (Use two sig. figs.))

Part B- If the unit requires reprogramming calibration during the fourth year at a cost of $30,000, what is the new IRR with this condition?

2.You purchase a farm for $1,000,000 in cash. A local farmer rents the land to grow wheat and this pays your real estate taxes and insurance. After five years you can sell for $2,000,000. If inflation is 3% per year, what is your real rate of return on the investment?

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1. (Part A - You are considering an upgrade at a chip manufacturing plant. A new VLSI testing station costs $100,000, installed. It will save $50,000 per year in labor ...

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