Question

Galindo Long-Haul, Inc., is considering the purchase of a tractor-trailer that would cost $178,848, would have a useful life of 8 years, and would have no salvage value. The tractor-trailer would be used in the company's hauling business, resulting in additional net cash inflows of $36,000 per year. The internal rate of return on the investment in the tractor-trailer is closest to:

Answer 1

the internal rate of return is 12%

Step-by-step explanation:

The computation of the internal rate of return is as follows;

Year Cash flows

0 -$178,848

1 $36,000

2 $36,000

3 $36,000

4 $36,000

5 $36,000

6 $36,000

7 $36,000

8 $36,000

Now apply the IRR formula

= IRR()

After applying it, the internal rate of return is 12%