Baber Corporation is planning an investment with the following characteristics: (Ignore income taxes in this problem.) The initial cost of the equipment is closest to: (Round discount factor(s) to 3 decimal places) a. $810100 b. $508500 c. $518850 d. cannot be determined from the given information. PLEASE SHOW ALL WORK Solution The initial investment = present value of future cash flows discounted at IRR. Thus, Present value = 90,000 / (1.12) + 90,000 / (1.12) 2 + . . . . . 90,000 / (1.12) 10 = 90000/1.12 [ 1 - (1.12) -10 / 1 - (1.12) -1 ] = 508520 Thus, initial Investment = 508500 /- Option B is correct. Ask if you have doubts. Thanks .