Rent-to-Own Equipment Co. is considering a new inventory system that will cost $450,000. The system is expected to generate positive cash flows over the next four years in the amounts of $250,000 in year one, $125,000 in year two, $110,000 in year three, and $80,000 in year four. Rent-to-Own's required rate of return is 10%. What is the internal rate of return of this project

Question

Business

Luz Reeves

9 January, 02:49

Rent-to-Own Equipment Co. is considering a new inventory system that will cost $450,000. The system is expected to generate positive cash flows over the next four years in the amounts of $250,000 in year one, $125,000 in year two, $110,000 in year three, and $80,000 in year four. Rent-to-Own's required rate of return is 10%. What is the internal rate of return of this project

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Answers (1)

Know the Answer?

Gregory Dunn · Answer 1

12.26%

Explanation:

Using financial calculator:

1. Press CF

CFo = - 450,000 (Enter)

C01 = 250,000 F01 = 1

C02 = 125000 F02 = 1

C03 = 110000 F03 = 1

C04 = 80000 F04 = 1

2. Press 2nd + Enter to quit

3. Press CPT + IRR

--> Internal rate of return of this project is 12.26%