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Calculate the internal rate of return

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Reference no: EM13954349

Palermo Pizzeria is considering expanding operations by establishing a delivery business. This will require the purchase of an oven that will cost $50,000, including installation. The oven is expected to last five years, have a $5,000 residual value, and will be depreciated using the straight-line method. Cash flows associated with the delivery business are as follows:
In addition to the above, there are tax consequences related to the new business, and the company's tax rate is 40 percent.

Required:

Calculate the internal rate of return for the delivery business. Should Palermo Pizzeria invest in the delivery business if the required rate of return is 10 percent?

Reference no: EM13954349

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