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You are considering launching a new product that will require $1.2 million of capital investment (eligible for bonus depreciation) and $200,000 of additional working capital
You are considering launching a new product that will require $1.2 million of capital investment (eligible for bonus depreciation) and $200,000 of additional working capital at your firm. The capital assets will have zero salvage value in 5 years' time.
You expect you can sell 10 units in year 1 and 20 units per year in years 2-5, at an average revenue per unit of $85,000 and cost to produce each unit of $45,000. Your firm's tax rate is 20%.
What is the IRR of the project?
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