Based on the following information:The investment cost is paid in full in quarter 0, and the cost of the factory is 100000 while the cost of the research is also 100000.The factory has a lifetime of 20 quarters (5 years) and the value of the factory at the end of quarter 20 is 0Only green jetpacks should be produced at the factory throughout its lifetime.There is no investment in research to streamline production or material consumption.Suppose the quarterly demand in the market is constant and given at P = 338 - 0.018 * Q, where P is price and Q is the number of jetpacks in demand. Assume P is 248 USD and Q is 5000.There are 5 competitors in the market (including you), and all sell the same number of jetpacks each quarter at the price of 248 each.You produce as much as you sell.The costs associated with the quarterly production at the factory are given at K = 178 * Q + 20000, where 178 * Q is direct labor cost and materials, and 20000 is quarterly maintenance cost when Q is the number of jetpacks produced.The company has an annual discount rate of 20% on the investment. This means you need to divide it by 4 to get the quarterly rate.NPV before Tax on the investment is 4,118,050 USD. Calculate the internal rate of return before tax

The internal rate of return (IRR) is the discount rate that makes the net present value (NPV) of all…

Answered: NPV before Tax on the investment is…

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter5: Investment Decisions: Look Ahead And Reason Back

Section: Chapter Questions

Problem 5.4IP

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Based on the following information:

The investment cost is paid in full in quarter 0, and the cost of the factory is 100000 while the cost of the research is also 100000.
The factory has a lifetime of 20 quarters (5 years) and the value of the factory at the end of quarter 20 is 0
Only green jetpacks should be produced at the factory throughout its lifetime.
There is no investment in research to streamline production or material consumption.
Suppose the quarterly demand in the market is constant and given at P = 338 - 0.018 * Q, where P is price and Q is the number of jetpacks in demand. Assume P is 248 USD and Q is 5000.
There are 5 competitors in the market (including you), and all sell the same number of jetpacks each quarter at the price of 248 each.
You produce as much as you sell.
The costs associated with the quarterly production at the factory are given at K = 178 * Q + 20000, where 178 * Q is direct labor cost and materials, and 20000 is quarterly maintenance cost when Q is the number of jetpacks produced.
The company has an annual discount rate of 20% on the investment. This means you need to divide it by 4 to get the quarterly rate.
NPV before Tax on the investment is 4,118,050 USD. Calculate the internal rate of return before tax

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