34

USE THE FOLLOWING INFORMATION TO ANSWER QUESTIONS 31-34 Last year, Muskett Inc., which makes nonflammable fireworks, hired an engineering firm to evaluate the technical capabilities of three different pieces of high-tech equipment that may be used in their manufacturing process. The study cost $300,000 and the results suggested that only the ECU-9 was capable of meeting Muskett's needs. The ECU-9 will cost $4 million. The equipment will be depreciated straight-line over 25 years to a salvage value of $400,000 and sold for that amount in 25 years. If purchased the ECU-9 will increase revenues by $2.3 million per year and increase operating cost by $1.5 million per year. The company will increase net working capital by $150,000 at the beginning of the project. This working capital will be liquidated at the end of the project. The marginal tax rate is 25%. The cost of capital is 13.00%. the amiantie CFO) is $ . %. 34. Based on this information, the project's IRR is a. 14.70 b. 14.80 c. 14.84 d. 14.91 e. 15.01