The Culinary Institute is considering a classroom remodeling project. The cost of the remodel would be $350,000 and will be depreciated over six years using the straight- line method. The model will acoomoodate five extra student per year. Additional information related to the project follows: Cost of the remodel project: $350,000

Useful life of project in years: 6

Annual number of extra students: 5

Annual tuition per student: $22,000

Before- tax incremental cost of a student: $2,000

Company's income tax rate: 20%

Required rate of return: 12%

Assuming a six- year time horizon, what is the internal rate of return of the remodeling project? Calculate using both present value factors and separately using Excel's IRR function. Please include formulas to show how you arrive at each solution!

A) Annual cash flow:

Revenue ?

Less costs: Other than depreciation ?

Depreciation ?

Income before taxes ?

Income tax expense ?

Net income ?

Add depreciation ?

Cash flow ?

B) Present Value Factor- solve below and indicate how the internal rate of return is calculated using the factor arrived at below.

? / ? = ? Factor