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Tovar ToastersTovar Toasters is considering an equipment investment that will cost $955,000.

Projected net cash inflows over the equipment's three-year life are as follows: Year 1: $494,000;

Year 2: $400,000;

and Year 3: $292,000.

Tovar Tovar wants to know the equipment's IRR.

Requirement

Use trial and error to find the IRR within a 2% range.

(Hint: Use TovarTovar's hurdle rate of 10% to begin the trial-and-error process.) Use a business calculator or spreadsheet to compute the exact IRR)

Present Value of Annuity of $1
Periods	1%	2%	3%	4%	5%	6%	8%	10%	12%	14%	16%	18%	20%
1	0.990	0.980	0.971	0.962	0.952	0.943	0.926	0.909	0.893	0.877	0.862	0.847	0.833
2	1.970	1.942	1.913	1.886	1.859	1.833	1.783	1.736	1.690	1.647	1.605	1.566	1.528
3	2.941	2.884	2.829	2.775	2.723	2.673	2.577	2.487	2.402	2.322	2.246	2.174	2.106
4	3.902	3.808	3.717	3.630	3.546	3.465	3.312	3.170	3.037	2.914	2.798	2.690	2.589
5	4.853	4.713	4.580	4.452	4.329	4.212	3.993	3.791	3.605	3.433	3.274	3.127	2.991
6	5.795	5.601	5.417	5.242	5.076	4.917	4.623	4.355	4.111	3.889	3.685	3.498	3.326
7	6.728	6.472	6.230	6.002	5.786	5.582	5.206	4.868	4.564	4.288	4.039	3.812	3.605
8	7.652	7.325	7.020	6.733	6.463	6.210	5.747	5.335	4.968	4.639	4.344	4.078	3.837
9	8.566	8.162	7.786	7.435	7.108	6.802	6.247	5.759	5.328	4.946	4.607	4.303	4.031
10	9.471	8.983	8.530	8.111	7.722	7.360	6.710	6.145	5.650	5.216	4.833	4.494	4.192
11	10.368	9.787	9.253	8.760	8.306	7.887	7.139	6.495	5.938	5.453	5.029	4.656	4.327
12	11.255	10.575	9.954	9.385	8.863	8.384	7.536	6.814	6.194	5.660	5.197	4.793	4.439
13	12.134	11.348	10.635	9.986	9.394	8.853	7.904	7.103	6.424	5.842	5.342	4.910	4.533
14	13.004	12.106	11.296	10.563	9.899	9.295	8.244	7.367	6.628	6.002	5.468	5.008	4.611
15	13.865	12.849	11.938	11.118	10.380	9.712	8.559	7.606	6.811	6.142	5.575	5.092	4.675
20	18.046	16.351	14.877	13.590	12.462	11.470	9.818	8.514	7.469	6.623	5.929	5.353	4.870
25	22.023	19.523	17.413	15.622	14.094	12.783	10.675	9.077	7.843	6.873	6.097	5.467	4.948
30	25.808	22.396	19.600	17.292	15.372	13.765	11.258	9.427	8.055	7.003	6.177	5.517	4.979
40	32.835	27.355	23.115	19.793	17.159	15.046	11.925	9.779	8.244	7.105	6.233	5.548	4.997

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