Equipment A has a cost of Rs.150.000 and net cash flow of Rs.40,000 per year for six years. A substitute equipment B would cost Rs.100,000 and generate net cash flow of Rs.28,000 per year for six years. The required rate of return for both the equipments is 10 percent. Calculate the IRR and NPV for the equipments. Which equipment should be accepted and why?

Equipment A has a cost of Rs.150.000 and net cash flow of Rs.40,000 per year for six years. A substitute equipment B would cost Rs.100,000 and generate net cash flow of Rs.28,000 per year for six years. The required rate of return for both the equipments is 10 percent. Calculate the IRR and NPV for the equipments. Which equipment should be accepted and why?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 19EA: Redbird Company is considering a project with an initial investment of $265,000 in new equipment...

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