A firm considers to buy a new 3D printer whose cost is $ 46 100. The cost of 3D printer will be paid in 2022. The expected cash flows of this investment are as follows:
2023: $ 13 200
2024: $ 13 200
2025: $ 13 200
2026: $ 13 200
2027: $ 13 200
a) Find the Internal Rate of Return (IRR) of this project.
b) Given that the current annual interest rate is 15% and the risk premium appropriate for this investment is 5%; should the firm accept or reject this investment.
Note: If you do not have access to a sophisticated calculator or Excel which you need to provide a numerical answer; write the relevant formula for IRR. If your formula is correct; you receive full grade for question 4a. Write the decision criteria according to which we accept or reject an investment on basis of IRR (e.g write something like a>b specifying what a is and what b is) to get full credit for 4b in case you are unable to calculate the IRR.