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Global Water Treatment, Inc. is analyzing a proposed investment that would initially require $750,000 of new...

Global Water Treatment, Inc. is analyzing a proposed investment that would initially require $750,000 of new equipment. This equipment would be depreciated on a straight-line basis to a zero balance over the four-year life of the project. The estimated salvage value is $150,000. The project requires $50,000 initially for net working capital, all of which will be recouped at the end of the project. The projected operating cash flow is $ 265,000 a year. What is the internal rate of return on this project if the relevant tax rate is 21 percent?

  • 15.51 percent

  • 15.98 percent

  • 20.12 percent

  • 17.64 percent

  • 17.99 percent

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Answer #1

А YEAR 1 2 3 4 IRR cash flows -$800,000 $265,000 $265,000 $265,000 $433,500 17.99% 7 IRR(B2:B6)

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