Question

The capital budgeting director of Sparrow Corporation is evaluating a project that costs $200,000, is expected to last for 10 years, and produces after-tax cash flows equal to $44,503 per year. If the firm's required rate of return is 14 percent and its tax rate is 40 percent, what is the project's internal rate of return (IRR)

Answer 1

Answer:

17.37%

Explanation:

The Internal rate of return is the interest rate that gives the same present value as the amount of initial investment for

Calculation of IRR

($200,000) CFO

$44,503       CF1

$44,503       CF2

$44,503       CF3

$44,503       CF4

$44,503       CF5

$44,503       CF6

$44,503       CF7

$44,503       CF8

$44,503       CF9

$44,503       CF10

the project's internal rate of return (IRR) is 17.37%