Question

Home Security Systems is analyzing the purchase of manufacturing equipment that will cost $95,000. The annual cash inflows for the next three years will be: Year Cash Flow

1 $ 48,000
2 46,000
3 41,000

Answer 1

internal rate of return is 20.463%

Step-by-step explanation:

given data

Year Cash Flow

1 $48,000

2 $46,000

3 $41,000

equipment cost = $95,000

to find out

Determine the internal rate of return

solution

we consider here internal rate of return is x

so we can say present value of inflows = present value of outflows

equate here

$95000 =
`(48000)/((x)) +(46000)/((x)^2) +(41000)/((x)^3)`

solve it we get

x = 20.463 %

so internal rate of return is 20.463%