Answer:
Explanation:
Using a financial calculator, input the following using the "CF" button;
<u>Pierce Chocolates has 5 years of cash inflows;</u>
Initial investment ; CF0 = - 450,000
Yr1 Cashflow; CF1 = 110,000
Yr2 Cashflow; CF2 = 110,000
Yr3 Cashflow; CF3 = 110,000
Yr4 Cashflow; CF4 = 110,000
Yr5 Cashflow; CF5 = 110,000
Then compute Internal rate of return; IRR CPT = 7.09%
<u>Berry Sweets has 6 years of cash inflows;</u>
Initial investment ; CF0 = - 450,000
Yr1 Cashflow; CF1 = 110,000
Yr2 Cashflow; CF2 = 110,000
Yr3 Cashflow; CF3 = 110,000
Yr4 Cashflow; CF4 = 110,000
Yr5 Cashflow; CF5 = 110,000
Yr6 Cashflow; CF6 = 110,000
Then compute Internal rate of return; IRR CPT = 12.18% hence higher.
