Larry s Homemade Ice Cream Shop located in the vibrant Adams

Last updated: 4/10/2024

Larry s Homemade Ice Cream Shop located in the vibrant Adams Morgan area of Washington D C is known for its gourmet ice cream However some customers have requested healthier low fat options Larry decides to invest in a new machine that makes delicious frozen yogurt The machine manufactured in Italy costs 5 000 plus an additional 1 750 for installation Larry estimates that the machine will generate a net cash flow of 2 000 per year He expects the machine to have a useful life of 10 years a salvage value of 400 Given Larry s cost of capital at 15 percent he questions whether the machine is overpriced Is he right What is the Internal Rate of Return IRR for th investment