A developer is pursuing a project with the following: Capital cost of project: $100,000.00 Initial working Capital: $5000.00 Economic life of project: 5 years Residual Value (year 6): $20,000.00 Net cash Y1 Y2 Y3 Funding from lenders: 80% Interest rate on loan: 10% Reinvestment rate: 15% Tax rate: 30% Y4 Y5 25000.00 30000.00 (-16000.00) 35000.00 40000.00
A developer is pursuing a project with the following: Capital cost of project: $100,000.00 Initial working Capital: $5000.00 Economic life of project: 5 years Residual Value (year 6): $20,000.00 Net cash Y1 Y2 Y3 Funding from lenders: 80% Interest rate on loan: 10% Reinvestment rate: 15% Tax rate: 30% Y4 Y5 25000.00 30000.00 (-16000.00) 35000.00 40000.00
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter12: Capital Investment Analysis
Section: Chapter Questions
Problem 4BE: Internal rate of return A project is estimated to cost 463,565 and provide annual net cash flows of...
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