I management is considering investing in two alternative Production systems. The systems are mutually excl 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 0 1 2 3 System 1 -$15,200 14,700 14,700 14,700 System 2 -$46,600 32,600 32,600 32,600 Compute the IRR for both production system 1 and production system 2. (Do not round intermediate calculations. Round answers decimal places, e.g. 15.25%.)
I management is considering investing in two alternative Production systems. The systems are mutually excl 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 0 1 2 3 System 1 -$15,200 14,700 14,700 14,700 System 2 -$46,600 32,600 32,600 32,600 Compute the IRR for both production system 1 and production system 2. (Do not round intermediate calculations. Round answers decimal places, e.g. 15.25%.)
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
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Transcribed Image Text:Sandhill Incorporated management is considering investing in two alternative Production systems. The systems are mutually exclusiv
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
0
1
2
System 1
-$15,200
14,700
14,700
14,700
System 2
IRR of system 1 is
-$46,600
32,600
32,600
32,600
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%.)
% and IRR of system 2 is
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