You are the CFO of a business and have the opportunity to evaluate two different investment...

You are the CFO of a business and have the opportunity to evaluate two different investment opportunities. Information related to these investments follows:

	Investment 1	Investment 2
Investment Cost	$ 800,000	$ 500,000
Salvage Value	$ 40,000	$ 50,000
Useful Life	8 years	15 years
Required Rate of Return	10%	10%
Sales	$ 450,000	$ 400,000
Variable Costs	$ 150,000	$ 175,000
Fixed Costs (excluding depreciation)	$ 100,000	$ 150,000
Tax Rate	35%	35%

Your company has a required rate of return of 10% for all new investments and is subject to a tax rate of 35%.

Calculate the Internal Rate of Return for each investment using the IRR function in Excel. (Note your guess for the interest rate in the formula should be the required rate of return)

Expert Solution

ekkarill92 answered 2 years ago

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You are the CFO of a business and have the opportunity to evaluate two different investment...

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