Question

Home Security Systems is analyzing the purchase of manufacturing equipment that will cost $54,000. The annual cash inflows for the next three years will be:Year Cash Flow1 $ 27,000 2 25,000 3 20,000

Answer 1

This question does not include what you are required to do. I looked it up on the web and it is asking for the Internal rate of return (IRR)

Step-by-step explanation:

Internal rate of return used in project evaluations is the rate at which the NPV of a project equals to zero.

You can solve for IRR using a financial calculator and the cashflow "CF " function. Key in the following inputs;

Initial investment; CF0 = -54,000

Yr1 cashflow inflow ; C01 = 27,000

Yr2 cashflow inflow ; C02 = 25,000

Yr3 cashflow inflow ; C03 = 20,000

Then key in IRR then CPT = 16.792%

Therefore, the Internal rate of return(IRR) for this equipment is 16.79%