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Listen Page 3 7 of 4 1 Using the information in the following chart, the IRR of this project is q , % . ASC,

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Page 37 of 41
Using the information in the following chart, the IRR of this project is q,%.
ASC, Inc. is considering the production of a new line of soft drinks at its Springfield, II plant.
The CFO of ASC, Inc. is provided with the following information on the new project:
The expansion will require the immediate purchase of new machinery for $39,000,000
The firm has spent $1,000,000 to train workers to use the new machinery.
The incremental sales from this project are expected to be $21,300,000 per year. The incremental operating expenses (excluding depreciation) are expected to equal $11,300,000 per year.
The company uses straight-line depreciation. The project has an economic life of 20 years. The machinery has a salvage value of $1,000,000 and will be sold for that amount at the conclusion of the project.
The company will increase net working capital by $1,200,000 at the beginning of the project, and it will be liquidated at the end of the project.
ASC Inc.'s marginal tax rate is 40%.
ASC Inc.'s weighted average cost of capital (WACC) is 14%.
16.28
19.40
14.88
None of the answers in this list is within 0.05 percentage points of the correct answer.
16.85
16.00
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