question archive Environmental Consulting can buy some field equipment for $42,000 or lease it for 2 years at $28,000 per year
Environmental Consulting can buy some field equipment for $42,000 or lease it for 2 years at $28,000 per year
Subject:EconomicsPrice:2.87 Bought7
Environmental Consulting can buy some field equipment for $42,000 or lease it for 2 years at $28,000 per year. Salvage value of the equipment after 2 years would be $7,000. What is the IRR of the leasing option? (Present your answer in percentage form with 2 decimal places and without the % sign)
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Answer:
Using the calculator or Rate funcion in excel:
| Calculator | |
| Inputs: | |
| PV | 42,000.000 |
| PMT | (28,000.0) |
| FV | 7,000.00 |
| N | 2 |
| Output: | |
| I/Y = IRR | 11.506929% |
IRR is 11.51%
