Question

McGilla Golf has decided to sell a new line of golf clubs. The length of this project is seven years. The company has spent $1110000 on research and development for the new clubs. The plant and equipment required will cost $28122278 and will be depreciated on a straight-line basis. The new clubs will also require an increase in net working capital of $1313079 that will be returned at the end of the project. The OCF of the project will be $8052583. The tax rate is 32 percent. What is the IRR for this project?

Answer 1

Year	0	1	2	3	4	5	6	7
Initial cost	$   -281,22,278.00
Working capital	$     -13,13,079.00							$13,13,079.00
Operating cash flow		$80,52,583.00	$     80,52,583.00	$80,52,583.00	$80,52,583.00	$80,52,583.00	$80,52,583.00	$80,52,583.00
Total cash flow	$   -294,35,357.00	$80,52,583.00	$     80,52,583.00	$80,52,583.00	$80,52,583.00	$80,52,583.00	$80,52,583.00	$93,65,662.00
IRR	19.95%