2.14 To virtually everyone’s surprise, the new Washington Nationals baseball team earned a pre-tax profit of $20 million in 2005, compared to a $10 million loss when the team was the Montreal Expos in 2004 (Thomas Heath, “Nationals’ Expected ’05 Profit Is $20 Million,” Washington Post, June 21, 2005, A1). Major League Baseball, which bought the franchise for $120 million in 2002, sold the team for $450 million in 2006 (washington

.nationals.mlb.com). If the Nationals are expected to earn $20 million each year in the future, what is the internal rate of return on a $400 million investment for this club? (Hint: See Solved Problem 16.3.) A