Question
Tippit-the-Strong Company is looking at a new sausage system with an installed cost of $300,000. This asset will be depreciated according to MACRS 5 years
Tippit-the-Strong Company is looking at a new sausage system with an installed cost of $300,000. This asset will be depreciated according to MACRS 5 years over the projects three-year life, at the end of which the sausage system can be sold for $90,000. The sausage system will create annual savings of $200,000 (before taxes and depreciation), and the system requires an initial investment in net working capital of $40,000. The tax rate is 30 percent.
What is the IRR?
32.19% | ||
22.00% | ||
14.00% | ||
18.89% |
Based on the IRR criteria, you would reject this project If your required rate of return is 22%.
True
False
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