A project requires an initial investment of $100,000 and is expected to produce revenues less costs (RC) of 60,000 per year for two years (that is, at t = 1 and t = 2). The corporate tax rate is 30%. The assets will be depreciated using the MACRS 3-year schedule:

The company's tax situation is such that it can use all applicable tax shields. Assume that the asset will sell for book value at the end of two years. Calculate the IRR for the project.

a. 12.03%

b. 11.50%

c. 17.73%

d. 14.06%

Year 1 2 3 4 Depreciation Percentage 33% 45% 15% 7%