The new equipment will cost $400,000. It would be depreciated to zero using straight-line depreciation over...

The new equipment will cost $400,000. It would be depreciated to zero using straight-line depreciation over a 5-year period. The estimated salvage value is $100,000 at the end of the project. The initial requirement in net working capital is $55,000, all of which will be recouped at the end of the project. The projected operating cash flows are $155,500 per year. The tax rate is 30%. What is the internal rate of return on this 5-year project? Group of answer choices 15% 28% 21% 25% 18%

Expert Solution

The answer is IRR = 18%

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