Crane Incorporated management is considering investing in two alternative Production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. The firm uses a 7 percent discount rate for Production systems. Year System 1 System 2 0 -$14,400 -$46,800 1 15,200 30,800 2 15,200 30,800 3 15,200 30,800 Compute the IRR for both production system 1 and production system 2. (Do not round intermediate calculations. Round answers to 2 decimal places, e.g. 15.25%.) IRR of system 1 is Which has the higher IRR? has higher IRR. % and IRR of system 2 is %. Q Ac Q Acc Qu Acc Qu Acco
Crane Incorporated management is considering investing in two alternative Production systems. The systems are mutually exclusive, and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. The firm uses a 7 percent discount rate for Production systems. Year System 1 System 2 0 -$14,400 -$46,800 1 15,200 30,800 2 15,200 30,800 3 15,200 30,800 Compute the IRR for both production system 1 and production system 2. (Do not round intermediate calculations. Round answers to 2 decimal places, e.g. 15.25%.) IRR of system 1 is Which has the higher IRR? has higher IRR. % and IRR of system 2 is %. Q Ac Q Acc Qu Acc Qu Acco
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Crane Incorporated management is considering investing in two alternative Production systems. The systems are mutually exclusive,
and the cost of the new equipment and the resulting cash flows are shown in the accompanying table. The firm uses a 7 percent
discount rate for Production systems.
Year
System 1
System 2
0
-$14,400
-$46,800
1
15,200
30,800
2
15,200
30,800
3
15,200
30,800
Compute the IRR for both production system 1 and production system 2. (Do not round intermediate calculations. Round answers
to 2 decimal places, e.g. 15.25%.)
IRR of system 1 is
Which has the higher IRR?
has higher IRR.
% and IRR of system 2 is
%.
Q
Ac
Q
Acc
Qu
Acc
Qu
Acco
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