Realturf is considering purchasing an automatic sprinkler, Ask an Expert

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RealTurf is considering purchasing an automatic sprinkler system for its sod farm by borrowing the entire $35000 purchase price. The loan would be repaid with four equal payments at an interest rate of 12% per year. it is anticipated that the sprinkler system would be used for 9 years and then sold for a salvage value of $3000. Annual operating and maintenance expenses for the system over the 9 year life are estimated to be $11000 per year. if the new system is purchased, cost savings of $18000 per year will be realized over the present manual watering system. RealTurf uses a MARR of 15 percent/year for economic decision making. Based on the internal rate of return analysis, is the purchase of the new sprinker systerm economically attractive? What is the IRR?

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