To virtually everyone’s surprise, the Washington Nationals baseball team earned a pretax profit of

$20 million in 2005, compared to a $10 million loss when the team was the Montreal Expos in 2004

(Heath, Thomas, “Nationals’ Expected ’05 Profit Is $20 Million,” Washington Post, June 21, 2005, A1). Major League Baseball, which bought the franchise for $120 million in 2002, received eight bids of up to $400 million for the team. Reportedly, most baseball teams sell for between two and three times their revenue, so given that the Nationals’ projected revenue was $129 million in 2005, an offer of $400 million would be typical. If the Nationals were expected to earn $20 million each year in the future, what is the internal rate of return on a $400 million investment for this club? (Hint:

See Solved Problem 15.4.) M