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4)

An entrepreneur is setting up a new printing press. Given the onset of the digital era, the company can purchase used commercial presses at bargain prices. The entrepreneur has found one of the best for $500,000. A lot with a small (but adequate) building on it in the Fredericton industrial park will cost $600,000. Finally, upgrading the building to code will cost another $300,000. The entrepreneur is projecting profits in the neighbourhood of $300,000/ year. She only expects to be in business for eight years and will then retire, and which point she plans to give the business to her daughter (and then perhaps work part-time for the daughter). However, presses generate a lot of toxic chemicals (the cleaning solvents), which can be stored on site, but eventually must be properly disposed of. Her intention is to dispose of the chemicals just prior to handing over the business to her daughter. She's guessing that the one-time disposal fee will be about $120,000. Demonstrate that the IRR of this business venture is 13%