What is internal rate of return of neptune ltd investment

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Neptune Ltd. wants to expand its operations by manufacturing a new product line. New equipment will cost $225,000. Incremental sales are estimated at $150,000 per year for 6 years. Variable costs of producing the new product line are 52% of sales and incremental annual fixed costs are $25,000. The equipment can be salvaged after 6 years for 16% of its original cost. The company's required rate of return for new projects is 18%. Ignore income taxes.

Problem 1: What is the internal rate of return of the Neptune Ltd. investment?

Option 1: 12.75%

Option 2: 13.62%

Option 3: 6.86%

Option 4: 10.00%

Option 5: 18.00%

Reference no: EM132809297

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