monty, inc. is considering purchasing equipment costing $90000 with a 6-year useful life. the equipment will provide annual cost savings of $22600 and will be depreciated straight-line over its useful life with no salvage value. monty requires a 10% rate of return. present value of an annuity of 1 period 8% 9% 10% 11% 12% 15% 6 4.623 4.486 4.355 4.231 4.111 3.784 what is the approximate net present value of this investment?

Choose two potential discount rates. Choose two discount rates to apply before you start your calculations.
Make a net present value calculation. Calculate the net present values based on each estimate using the two values you chose in step one.
Determine the IRR.

You may determine how profitable an investment is by looking at its IRR value; a greater IRR indicates a higher return on investment. An IRR of 20%, for instance, would be seen favorably in the field of commercial real estate, but it's crucial to keep in mind that it's always correlated with the cost of capital.

Formula and Calculation for IRR

[tex]\begin{aligned} &\text{IRR}=\text{NPV}=\sum_{t=1}^{T}\frac{C_t}{\left(1+r\right)^t}-C_0=0\\ &\textbf{where:}\\ &C_t=\text{Net cash inflow during the period t}\\ &C_0=\text{Total initial investment costs}\\ &r=\text{The discount rate}\\ &t=\text{The number of time periods}\\ \end{aligned}[/tex]

4.231% is the approximate net present value of this investment.

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