Question - Using the Excel functions for =NPV and =IRR, answer these questions: Jordan Company buys equipment for $50,000 that will last for 4 years. The equipment will generate cash flows of $18,000 per year and will have no salvage value at the end of its life. Ignore taxes. Use 10% required rate of return.
Required:
(1) What is the net present value (NPV) of this investment? Should Jordan Company buy the equipment based on NPV? Justify your decision.
(2) What is the internal rate of return (IRR) of this investment?