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Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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Solve it mannually
After a long drought, the manager
of Long Branch Farms is
considering the installation of an
irrigation system that will cost
$100,000. estimated that the
irrigation system will increase
revenues by $20,500 annually,
although operating expenses
other than depreciation will also
increase by $5,000. The system
will be depreciated using MACRS
over its depreciable life (5 years)
to a zero salvage value. The
applicable depreciation rates are
20 percent, 32 percent, 19
percent, 12 percent, 11 percent,
and 6 percent. If the tax rate is 40
percent, what is the
project's IRR?
Answer: IRR = 1.3
Transcribed Image Text:Solve it mannually After a long drought, the manager of Long Branch Farms is considering the installation of an irrigation system that will cost $100,000. estimated that the irrigation system will increase revenues by $20,500 annually, although operating expenses other than depreciation will also increase by $5,000. The system will be depreciated using MACRS over its depreciable life (5 years) to a zero salvage value. The applicable depreciation rates are 20 percent, 32 percent, 19 percent, 12 percent, 11 percent, and 6 percent. If the tax rate is 40 percent, what is the project's IRR? Answer: IRR = 1.3
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