South Side, Inc., is considering opening a branch in another state. The operating cash flow will be $185,000 a year. The project will require new equipment costing $495,000 that would be depreciated on a straight-line basis to zero over the 5-year life of the project. The equipment will have a market value of $95,000 at the end of the project. The project requires an initial investment of $110,000 in net working capital, which will be recovered at the end of the project. The tax rate is 28 percent. What is the project's IRR? Enter your answer as a whole number rounded to three decimal places, i.e., enter 5.123% as 5.123.

South Side, Inc., is considering opening a branch in another state. The operating cash flow will be $185,000 a year. The project will require new equipment costing $495,000 that would be depreciated on a straight-line basis to zero over the 5-year life of the project. The equipment will have a market value of $95,000 at the end of the project. The project requires an initial investment of $110,000 in net working capital, which will be recovered at the end of the project. The tax rate is 28 percent. What is the project's IRR? Enter your answer as a whole number rounded to three decimal places, i.e., enter 5.123% as 5.123.

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Description: South Side, Inc., is considering opening a branch in another state. Theoperating cash flow will be $185,000 a year. The project will require newequipment costing $495,000 that would be depreciated on a straight-linebasis to zero over the 5-year life

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 2PB: Markoff Products is considering two competing projects, but only one will be selected. Project A...

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Markoff Products is considering two competing projects, but only one will be selected. Project A requires an initial investment of $42,000 and is expected to generate future cash flows of $6,000 for each of the next 50 years. Project B requires an initial investment of $210,000 and will generate $30,000 for each of the next 10 years. If Markoff requires a payback of 8 years or less, which project should it select based on payback periods?
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Roberts Company is considering an investment in equipment that is capable of producing more efficiently than the current technology. The outlay required is 2,293,200. The equipment is expected to last five years and will have no salvage value. The expected cash flows associated with the project are as follows: Required: 1. Compute the projects payback period. 2. Compute the projects accounting rate of return. 3. Compute the projects net present value, assuming a required rate of return of 10 percent. 4. Compute the projects internal rate of return.
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