e. Based on the NPV calculations, what would be the equipment's internal rate of return?

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
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I only need E. Answers for A - D

A: 6.56%

B: 6 Years

C: NPV 78,529

D: NPV @ 14% -186,142

Please explain the answer for question E. I am unsure how to get it. 

Briar Corporation is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an
annual increase in net cash flow of $204,000. The equipment will have an initial cost of $1,204,000 and an 8-year useful life. The
salvage value of the equipment is estimated to be $204,000. Briar's cost of capital is 8%. (Future Value of $1, Present Value of $1,
Future Value Annuity of $1, Present Value Annuity of $1)
Note: Use appropriate factor from the PV tables.
Required:
a. What is the accounting rate of return?
b. What is the payback period?
c. What is the net present value?
d. What would the net present value be with a 14% cost of capital?
e. Based on the NPV calculations, what would be the equipment's internal rate of return?
Complete this question by entering your answers in the tabs below.
Required A Required B
Required C Required D Required E
Based on the NPV calculations, what would be the equipment's internal rate of return?
Note: Round your answer to 2 decimal places.
Internal Rate of Return
%
Transcribed Image Text:Briar Corporation is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an annual increase in net cash flow of $204,000. The equipment will have an initial cost of $1,204,000 and an 8-year useful life. The salvage value of the equipment is estimated to be $204,000. Briar's cost of capital is 8%. (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1) Note: Use appropriate factor from the PV tables. Required: a. What is the accounting rate of return? b. What is the payback period? c. What is the net present value? d. What would the net present value be with a 14% cost of capital? e. Based on the NPV calculations, what would be the equipment's internal rate of return? Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Required E Based on the NPV calculations, what would be the equipment's internal rate of return? Note: Round your answer to 2 decimal places. Internal Rate of Return %
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