Big Steve's makers of swizzle sticks, is considering the purchase of a new plastic stamping machine. This investment requires an initial outlay of $110,000 and will generate net
IRR (Internal Rate of Return) :
IRR is the discount rate at which the net present value (NPV) of cash flows from an investment becomes zero.
In other words, it's the rate of return that makes the present value of cash inflows equal to the present value of cash outflows for a project.
IRR is used to evaluate the attractiveness of an investment. If the calculated IRR is higher than the MARR, the investment is potentially worth pursuing, as it indicates that the project's returns are greater than the required rate of return.
IRR can be used to compare different projects with varying cash flow patterns and investment amounts. Projects with higher IRRs are generally preferred, assuming other factors are equal.
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