Determining the internal rate of return Irving Manufacturing Company has an opportunity to purchase some technologically advanced equipment that will reduce the company's cash outflow for operating expenses by $1,280,000 per year. The cost of the equipment is $6,186,530.56. Irving expects it to have a 10-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.
Required
a. Calculate the internal rate of return of the investment opportunity.
b. Indicate whether the investment opportunity should be accepted.