Question 1: (8 points) Mini-Fit Solution s is a manufacturer of miniature valves and fittings. Over an 8 year period the costs associated with a certain product line were as follows: Initial cost: $45,000 Annual Costs: $25,000 Annual Revenues: $35,000 (1) What was the company’s Internal Rate of Return (IRR) for the product over this study period? (2) (EC – 3 points) If the reinvestment rate was 15% during the period, what External Rate of Return (ERR) did the company make?.

1. Question 1: (8 points) Mini-Fit
Solution
s is a manufacturer of miniature valves and fittings. Over an 8 year period the costs associated
with a certain product line were as follows:
Initial cost: $45,000
Annual Costs: $25,000
Annual Revenues: $35,000
(1) What was the company’s Internal Rate of Return (IRR) for the product over this study
period?
(2) (EC – 3 points) If the reinvestment rate was 15% during the period, what External Rate of
Return (ERR) did the company make?