Your firm spends $474,000 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,...

Your firm spends

per year in regular maintenance of its equipment. Due to the economic​ downturn, the firm considers forgoing these maintenance expenses for the next

years. If it does​ so, it expects it will need to spend

million in year

replacing failed equipment.

a. What is the IRR of the decision to forgo maintenance of the​ equipment?

b. Does the IRR rule work for this​ decision?

c. For what costs of capital​ (COC) is forgoing maintenance a good​ decision?

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