Nancy's Notions pays a delivery firm to distribute its products in the metro area. Delivery costs are $36,000 per year. Nancy can buy a used truck for $7,000 that will be adequate for the next 3 years. Operating and maintenance costs are estimated to be $29,000 per year. At the end of 3 years, the used truck will have an estimated salvage value of $3,000. Nancy's MARR is 29%/year.
a. What is this investment's internal rate of return?
b. What is the decision rule for judging the attractiveness of investments based on internal rate of return?
c. Should Nancy buy the truck?