Question
Wilson, Inc., is considering a new four-year expansion project that requires an initial fixed asset investment of $1,875,000. The fixed asset will be depreciated straight-line
Wilson, Inc., is considering a new four-year expansion project that requires an initial fixed asset investment of $1,875,000. The fixed asset will be depreciated straight-line to zero over its four-year tax life, after which time it will be worthless. The project is estimated to generate $2,040,000 in annual sales, with costs of $1,235,000. If the tax rate is 35%, and the required return on the project is 12%, what is the project's IRR?
Hint: Use Tax Shield Approach to calculating Operating Cash Flow formula learned in Chapter 9
14.29% | ||
18.28% | ||
17.30% | ||
19.30% | ||
17.28% |
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