Compute the project internal rate of return

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Reference no: EM132787607

Dasher, Inc., is considering a project that would have a five-year life and would require a $1,000,000 investment in equipment. At the end of five years, the project would terminate and the equipment would have no salvage value. The project would provide net operating income each year as follows:

Sales                                                   $950,000
Variable Expenses                                    500,000
Contribution Margin                                     450,000

Fixed Expenses:

Fixed out-of-pocket cash expenses                 100,000
Depreciation                                                  50,000
                                                                   150,000
Net Operating Income                                     $300,000

All of the above items, except for depreciation, represent cash flows. The company's required rate of return is 10%.

Required:

Problem a. Compute the project's net present value.

Problem b. Compute the project's internal rate of return to the nearest whole percent.

Problem c. Compute the project's payback period.

Reference no: EM132787607

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