Question

A potential investment requires an initial cash outlay of $675,000 and has a useful life of 10 years. Annual cash receipts from the investment are expected to be $185,000. The salvage value of the investment is expected to be $60,000. The company’s tax rate is 30%. The entire initial cash outlay (without any reduction for salvage value) will be depreciated over 10 years. Assume a discount rate of 21%.

Show your Excel input and calculated net present value after-tax. (If a variable is not used in the calculation, input a zero (0). Omit the "$" and "%" signs in your response. Round answers to the nearest dollar and use a minus sign ( - ) for negative numbers.)

Excel input:

Rate

%

Nper

PMT

$

PV

$

FV

$

Net present value

$

Required:

Show your Excel input and calculated internal rate of return after-tax. (If a variable is not used in the calculation, input a zero (0). Omit the "$" and "%" signs in your response. Round answers to the nearest dollar / whole number and use a minus sign (-) for negative numbers.)

Excel / calculator input:

Rate

%

Nper

PMT

$

PV

$

FV

$

Internal Rate of Return (IRR)

%

Answer 1