A community for students. Sign up today!
Here's the question you clicked on:
 0 viewing
 2 years ago
Finance or Math Question: A company is considering a new project. The current tax rate is 34% with a 15% discount rate.
Cost of new plant and equipment $7,900,000
Shipping and installation costs $100,000
I have calculated all the unit sales and the variable cost per units. The annual fixed cost of $200,000 per year. There are 5 years involved. How do I figure the Internal rate of return for the 5 years? The initial working capital is $100,000. For each year the total investment in net working capital will be equal to 10% of the dollar value of sales for that year.
 2 years ago
Finance or Math Question: A company is considering a new project. The current tax rate is 34% with a 15% discount rate. Cost of new plant and equipment $7,900,000 Shipping and installation costs $100,000 I have calculated all the unit sales and the variable cost per units. The annual fixed cost of $200,000 per year. There are 5 years involved. How do I figure the Internal rate of return for the 5 years? The initial working capital is $100,000. For each year the total investment in net working capital will be equal to 10% of the dollar value of sales for that year.

This Question is Closed

hadi.razavi
 2 years ago
Best ResponseYou've already chosen the best response.1hi i think it must be ::: in IRR (internal return rate) we have NPV=0 and then PV = I I = 8,000,000 $ and PV must be present value of net incomes for 5 years or the present value of decrease in expenses for years . but you have multiply them in (1  Tax Rate) for every year . after calculating the Tax effect we have the CF (cash flow of the year) CF = [incomes  expenses] . (1 34%) working capital = current assets  current liability in this case net income = 10% of sells \[pv = cf _{1} / (1+irr)^{1} + ... + cf _{5} / (1 + irr)^{5} = 8,000,000 $\] cf (n) = cash flow of the year n (in the end of the year ) after solving this must compare irr with markets discount rate if DR > IRR you can accept the plan

ravirajgohil
 2 years ago
Best ResponseYou've already chosen the best response.0you have to find the free cash flow but in your question we need PAT for that. however you can find free cash flow using this equation FCF = PAT + Dep Working capital adjustment  capital expenditure. find values for all years and that your can find the IRR using excel, Hope this helps.
Ask your own question
Ask a QuestionFind more explanations on OpenStudy
Your question is ready. Sign up for free to start getting answers.
spraguer
(Moderator)
5
→ View Detailed Profile
is replying to Can someone tell me what button the professor is hitting...
23
 Teamwork 19 Teammate
 Problem Solving 19 Hero
 Engagement 19 Mad Hatter
 You have blocked this person.
 ✔ You're a fan Checking fan status...
Thanks for being so helpful in mathematics. If you are getting quality help, make sure you spread the word about OpenStudy.