Considering expanding its wine-making operations

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Lakeside Grapes is considering expanding its wine-making operations. They would need new equipment that costs $390,000 that would be depreciated on a straight-line basis to a zero balance over the 5-year life of the project. The estimated salvage value is $62,000. The project requires $35,000 initially for net working capital, all of which will be recouped at the end of the project. The projected operating cash flow is $187,500 a year. What is the internal rate of return on this project if the relevant tax rate is 39 percent?

A. 16.42 percent

B. 16.67 percent

C. 18.90 percent

D. 35.94 percent

E. 41.50 percent

Reference no: EM13803373

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