Cirice Corporation is considering opening a branch in another state. The operating cash flow will be $154,200 a year. The project will require new equipmentcosting $601,000 that would be depreciated on a straight-line basis to zero over the 6-year life of the project. The equipment will have a market value of $183,000at the end of the project. The project requires an initial investment of $42,500 in net working capital, which will be recovered at the end of the project. The tax rateis 21 percent. What is the project's IRR?

Step 1:First find the After-tax salvage value:= 183,000 * ( 1 - 21%)= $144570 Step 2:= -601,000 -…

Answered: Cirice Corporation is considering…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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