Question

You buy a new piece of equipment for 7,360, and you receive a cash inflow of1,000 per year for 10 years. What is the internal rate of return?

Answer 1

The internal rate of return for the equipment purchase is approximately 10.7%.

Step-by-step explanation:

To calculate the internal rate of return, we can use the cash inflows and the initial cost of the equipment. In this case, we have a cash inflow of $1,000 per year for 10 years, and the initial cost of the equipment is $7,360. We need to find the discount rate that makes the net present value of these cash flows equal to zero.

Using a financial calculator or spreadsheet, we can input the cash flows and solve for the internal rate of return (IRR). In this case, the internal rate of return is approximately 10.7%.