2.Your firm spends $473,000 per year in regular maintenance of its equipment. Due to the economic downturn, the firm considers forgoing these maintenance expenses for the next 3 years. If it does so, it expects it will need to spend $1.9 million in year 4 replacing failed equipment. Does the IRR rule work for this decision?
Only if the replacement cost is below $2 million.
No.
Yes.