Use the trial and error method combined with linear interpolation to solve for the IRR of The Judas design (to one decimal place, XX.X%) Problem 1Four alternative designs are being considered for a pet-exercising treadmill. The company's MARR is 18%.The cash flows associated with each are given in thefollowing table.The Judas The Lancelot The BellaThe LiloCapital Investment$120,000$130,000$141,000$160,000Annual Revenues$50,000$50,000$50,000$50,000Annual Expenses$20,000$15,000$13,000$14,000Refurbishment Cost at EOY 5$23,000$23,000$18,000$15,000Market Value after 10 years$4,000$4,000$5,000$15,000IRR???21.8%21.6%17.7%

The Internal Rate of Return:The Internal Rate of Return or the IRR is a popular capital budgeting…

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Use the trial and error method combined with linear interpolation to solve for the IRR of The Judas design (to one decimal place, XX.X%)

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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Question

Use the trial and error method combined with linear interpolation to solve for the IRR of The Judas design (to one decimal place, XX.X%)

Problem 1
Four alternative designs are being considered for a pet-
exercising treadmill. The company's MARR is 18%.
The cash flows associated with each are given in the
following table.
The Judas The Lancelot The Bella
The Lilo
Capital Investment
$120,000
$130,000
$141,000
$160,000
Annual Revenues
$50,000
$50,000
$50,000
$50,000
Annual Expenses
$20,000
$15,000
$13,000
$14,000
Refurbishment Cost at EOY 5
$23,000
$23,000
$18,000
$15,000
Market Value after 10 years
$4,000
$4,000
$5,000
$15,000
IRR
???
21.8%
21.6%
17.7%

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Step 2: The trial and error method of determining the IRR:

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Step 3: Computing the IRR with the trial and error method:

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Step 4: Computing the IRR with the interpolation method:

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