Bauerkemper Inc. is considering a project that would require an initial investme

Question

Bauerkemper Inc. is considering a project that would require an initial investment of $924,000 and would have a useful life of 7 years. The annual net cash receipts would be $346,000. The salvage value of the assets used in the project would be $92,000. The company%u2019s tax rate is 30%. For tax purposes, the entire initial investment without any reduction for salvage value will be depreciated over 7 years. The company uses a discount rate of 17%.

Compute the internal rate of return of the project by inputting the variables that are entered into your calculator / Excel. (If a variable is not used in the calculation, input a zero (0) Round answers to the nearest dollar / whole number and use a minus sign (-) for negative numbers.

Bauerkemper Inc. is considering a project that would require an initial investment of $924,000 and would have a useful life of 7 years. The annual net cash receipts would be $346,000. The salvage value of the assets used in the project would be $92,000. The company%u2019s tax rate is 30%. For tax purposes, the entire initial investment without any reduction for salvage value will be depreciated over 7 years. The company uses a discount rate of 17%.

Explanation / Answer

IRR = 56.123%

0 -924000 -924000 1 346000 221620.23 2 346000 141952.39 3 346000 90923.48 4 346000 58238.39 5 346000 37302.91 6 346000 23893.29 7 346000 92000 350069.31 0

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