A project requires a $1 million initial investment, and will yield incremental after-tax cash flows of $225,000 next year, and this will decline forever at rate of g = -5% per year. What is the IRR of the project, stated as an APR compounded annually?

A project requires a $1 million initial investment, and will yield incremental after-tax cash flows of $225,000 next year, and this will decline forever at rate of g = -5% per year. What is the IRR of the project, stated as an APR compounded annually?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 19EA: Redbird Company is considering a project with an initial investment of $265,000 in new equipment...

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

Definition Definition Discount rate of a project wherein its net present value equals zero. Internal rate of return equates the present value of future cash flows with the initial investments. Internal rate of return helps to determine nominal cash flows.

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