Business Finance Homework Help

Fanning Manufacturing Company has an opportunity to purchase some technologically advanced equipment that will reduce the company’s cash outflow for operating expenses by $1,287,000 per year. The cost of the equipment is $5,187,854.53. Fanning expects it to have a 9-year useful life and a zero salvage value. The company has established an investment opportunity hurdle rate of 15 percent and uses the straight-line method for depreciation. (PV of $1 and PVA of $1)

1. Calculate the internal rate of return of the investment opportunity. (Do not round intermediate calculations.)
2. Indicate whether the investment opportunity should be accepted.