Adequate information: Purchasing price = $575,000 Useful life of the project = 5 years Salvage value = $60,000 Saving before tax = $176,000 Reduction in working capital = $80,000 Tax rate = 23% or 0.23 To compute: The internal rate of return (IRR) of the project. Introduction: IRR is the discounting rate that produces zero NPV , that is, the present value of aggregate cash inflows is the same as the present value of aggregate cash outflows associated with a project.

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Answer 1

Question

Chapter 6, Problem 7QAP

Summary Introduction

Adequate information:

Purchasing price = $575,000

Useful life of the project = 5 years

Salvage value = $60,000

Saving before tax = $176,000

Reduction in working capital = $80,000

Tax rate = 23% or 0.23

To compute: The internal rate of return (IRR) of the project.

Introduction: IRR is the discounting rate that produces zero NPV, that is, the present value of aggregate cash inflows is the same as the present value of aggregate cash outflows associated with a project.

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Answer 2

Question

Chapter 6, Problem 7QAP

Summary Introduction

Adequate information:

Purchasing price = $575,000

Useful life of the project = 5 years

Salvage value = $60,000

Saving before tax = $176,000

Reduction in working capital = $80,000

Tax rate = 23% or 0.23

To compute: The internal rate of return (IRR) of the project.

Introduction: IRR is the discounting rate that produces zero NPV, that is, the present value of aggregate cash inflows is the same as the present value of aggregate cash outflows associated with a project.

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Answer 3

Question

Chapter 6, Problem 7QAP

Summary Introduction

Adequate information:

Purchasing price = $575,000

Useful life of the project = 5 years

Salvage value = $60,000

Saving before tax = $176,000

Reduction in working capital = $80,000

Tax rate = 23% or 0.23

To compute: The internal rate of return (IRR) of the project.

Introduction: IRR is the discounting rate that produces zero NPV, that is, the present value of aggregate cash inflows is the same as the present value of aggregate cash outflows associated with a project.

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Answer 4

Question

Chapter 6, Problem 7QAP

Summary Introduction

Adequate information:

Purchasing price = $575,000

Useful life of the project = 5 years

Salvage value = $60,000

Saving before tax = $176,000

Reduction in working capital = $80,000

Tax rate = 23% or 0.23

To compute: The internal rate of return (IRR) of the project.

Introduction: IRR is the discounting rate that produces zero NPV, that is, the present value of aggregate cash inflows is the same as the present value of aggregate cash outflows associated with a project.

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Answer 5

Chapter 6, Problem 7QAP

Summary Introduction

Adequate information:

Purchasing price = $575,000

Useful life of the project = 5 years

Salvage value = $60,000

Saving before tax = $176,000

Reduction in working capital = $80,000

Tax rate = 23% or 0.23

To compute: The internal rate of return (IRR) of the project.

Introduction: IRR is the discounting rate that produces zero NPV, that is, the present value of aggregate cash inflows is the same as the present value of aggregate cash outflows associated with a project.

Answer 6

Chapter 6, Problem 7QAP

Summary Introduction

Adequate information:

Purchasing price = $575,000

Useful life of the project = 5 years

Salvage value = $60,000

Saving before tax = $176,000

Reduction in working capital = $80,000

Tax rate = 23% or 0.23

To compute: The internal rate of return (IRR) of the project.

Introduction: IRR is the discounting rate that produces zero NPV, that is, the present value of aggregate cash inflows is the same as the present value of aggregate cash outflows associated with a project.

Answer 7

Chapter 6, Problem 7QAP

Summary Introduction

Adequate information:

Purchasing price = $575,000

Useful life of the project = 5 years

Salvage value = $60,000

Saving before tax = $176,000

Reduction in working capital = $80,000

Tax rate = 23% or 0.23

To compute: The internal rate of return (IRR) of the project.

Introduction: IRR is the discounting rate that produces zero NPV, that is, the present value of aggregate cash inflows is the same as the present value of aggregate cash outflows associated with a project.

Answer 8

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Answer 9

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Answer 10

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Answer 11

Ch. 6 - Opportunity Cost In the context of capital...Ch. 6 - Prob. 2CQ Ch. 6 - Incremental Cash Flows Your company currently...Ch. 6 - Depreciation Given the choice, would a firm prefer...Ch. 6 - Prob. 5CQ Ch. 6 - Prob. 6CQ Ch. 6 - Equivalent Annual Cost When is EAC analysis...Ch. 6 - Prob. 8CQ Ch. 6 - Capital Budgeting Considerations A major college...Ch. 6 - To answer the next three questions, refer to the...

Solution Summary: The author calculates the internal rate of return (IRR) of the project for 5 years in which the initial investment is 575,000.

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Chapter 6 Solutions