Adequate information: Purchasing price = $575,000 Useful life of the project = 5 years Salvage value = $60,000 Saving before tax = $176,000 Reduction in working capital = $80,000 Tax rate = 23% or 0.23 To compute: The internal rate of return (IRR) of the project. Introduction: IRR is the discounting rate that produces zero NPV , that is, the present value of aggregate cash inflows is the same as the present value of aggregate cash outflows associated with a project.

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Chapter 6, Problem 7QAP

Summary Introduction

Adequate information:

Purchasing price = $575,000

Useful life of the project = 5 years

Salvage value = $60,000

Saving before tax = $176,000

Reduction in working capital = $80,000

Tax rate = 23% or 0.23

To compute: The internal rate of return (IRR) of the project.

Introduction: IRR is the discounting rate that produces zero NPV, that is, the present value of aggregate cash inflows is the same as the present value of aggregate cash outflows associated with a project.

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Answer 2

Question

Chapter 6, Problem 7QAP

Summary Introduction

Adequate information:

Purchasing price = $575,000

Useful life of the project = 5 years

Salvage value = $60,000

Saving before tax = $176,000

Reduction in working capital = $80,000

Tax rate = 23% or 0.23

To compute: The internal rate of return (IRR) of the project.

Introduction: IRR is the discounting rate that produces zero NPV, that is, the present value of aggregate cash inflows is the same as the present value of aggregate cash outflows associated with a project.

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Answer 3

Question

Chapter 6, Problem 7QAP

Summary Introduction

Adequate information:

Purchasing price = $575,000

Useful life of the project = 5 years

Salvage value = $60,000

Saving before tax = $176,000

Reduction in working capital = $80,000

Tax rate = 23% or 0.23

To compute: The internal rate of return (IRR) of the project.

Introduction: IRR is the discounting rate that produces zero NPV, that is, the present value of aggregate cash inflows is the same as the present value of aggregate cash outflows associated with a project.

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Answer 4

Question

Chapter 6, Problem 7QAP

Summary Introduction

Adequate information:

Purchasing price = $575,000

Useful life of the project = 5 years

Salvage value = $60,000

Saving before tax = $176,000

Reduction in working capital = $80,000

Tax rate = 23% or 0.23

To compute: The internal rate of return (IRR) of the project.

Introduction: IRR is the discounting rate that produces zero NPV, that is, the present value of aggregate cash inflows is the same as the present value of aggregate cash outflows associated with a project.

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Answer 5

Chapter 6, Problem 7QAP

Summary Introduction

Adequate information:

Purchasing price = $575,000

Useful life of the project = 5 years

Salvage value = $60,000

Saving before tax = $176,000

Reduction in working capital = $80,000

Tax rate = 23% or 0.23

To compute: The internal rate of return (IRR) of the project.

Introduction: IRR is the discounting rate that produces zero NPV, that is, the present value of aggregate cash inflows is the same as the present value of aggregate cash outflows associated with a project.

Answer 6

Chapter 6, Problem 7QAP

Summary Introduction

Adequate information:

Purchasing price = $575,000

Useful life of the project = 5 years

Salvage value = $60,000

Saving before tax = $176,000

Reduction in working capital = $80,000

Tax rate = 23% or 0.23

To compute: The internal rate of return (IRR) of the project.

Introduction: IRR is the discounting rate that produces zero NPV, that is, the present value of aggregate cash inflows is the same as the present value of aggregate cash outflows associated with a project.

Answer 7

Chapter 6, Problem 7QAP

Summary Introduction

Adequate information:

Purchasing price = $575,000

Useful life of the project = 5 years

Salvage value = $60,000

Saving before tax = $176,000

Reduction in working capital = $80,000

Tax rate = 23% or 0.23

To compute: The internal rate of return (IRR) of the project.

Introduction: IRR is the discounting rate that produces zero NPV, that is, the present value of aggregate cash inflows is the same as the present value of aggregate cash outflows associated with a project.

Answer 8

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Answer 11

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Solution Summary: The author calculates the internal rate of return (IRR) of the project for 5 years in which the initial investment is 575,000.

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