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## A project requires an initial investment of \$200,000 and exp

Homework Assistance Finance A project requires an initial investment of \$200,000 and exp

# A project requires an initial investment of \$200,000 and exp

A project requires an initial investment of \$200,000 and expects to produce a cash flow before taxes… Show more A project requires an initial investment of \$200,000 and expects to produce a cash flow before taxes of 120,000 per year for two years (i.e. cash flows will occur at t = 1 and t = 2). The corporate tax rate is 30%. The assets will depreciate using the MACRS year 3 schedule: (t = 1: 33%); (t = 2: 45%); (t = 3: 15%); (t = 4: 7%). The company’s tax situation is such that it can use all applicable tax shields. The opportunity cost of capital is 11%. Assume that the asset can sell for book value at the end of the project. Calculate the approximate IRR for the project. 12.00% 11.00% 17.73% 14.06% • Show less

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