Ebay is considering an investment into a project which it intends to operate for 5 years. The project requires an initial outlay of $6 million. The project will generate cash sales of $2.5 million in the first year. Sales will grow by $1 million each year in the following two years. After the third year, sales will grow by 7%. Cash operating costs, excluding depreciation, will be 20% of sales. Depreciation expenses will be 10% of sales. There are no cash flows associated with the salvage value or the net working capital. Ebay’s tax rate is 30%. What is the IRR of this project? (Round to the nearest two digits)

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Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.