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Elgin Restaurant Supplies is analyzing the purchase of manufacturing equipment that
$ 7.00

Elgin Restaurant Supplies is analyzing the purchase of manufacturing equipment that will cost $20,000. The annual cash inflows for the next three years will be:

Year

Cash Flow

1................

$10,000

2................

9,000

3................

6,500

         a.      Determine the internal rate of return using interpolation.

         b.      With a cost of capital of 12 percent, should the machine be purchased?

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