Share
Explore BrainMass

# Rate of return (IRR)

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?

#### Solution Preview

2 econ questions
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 ...

#### Solution Summary

Solution helps in telling about rate of return (IRR)

\$2.19