QUESTION $15$

Suppose you conducted a CBA using the inputs below for a project that lasts $5$ years.

Variables

Investment Cost $150\mathrm{.}00$

Annual Revenue $50\mathrm{.}00$

Annual Cost $6\mathrm{.}00$

Loan $80\mathrm{.}00$

Loan Interest $\%6\mathrm{.}00\%$

Depreciation p$.$a$.8\mathrm{.}00\%$

Profit Tax $25\mathrm{.}00\%$

Your analysis is in the following spreadsheAet.You found an IRR on equity of $5\mathrm{.}25\%.$

Assuming the company requires an IRR on equity of at least $6\%.$ What is the maximum profit tax the company can afford to pay under the current circumstances?

Maximum profit tax $=$

$\%$

Unfortunately for the firm the tax rate is fixed at $25\%.$ Consequently, the firm would like to know the minimum annual interest rate on the loan that would be required to achieve their $6\%$ IRR goal?

Minimum interest rate $=$

$\%$

Hint: To complete these questions you should use the $$Goal Seek$$ command in Excel to derive the values.

Provide your answers to $2$ decimal places. Do not include a $$$$$ or $\%$ in your answers.