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What is the net present value and irr of the investment

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Question - Possibilities, Inc. is considering the following investment. For financial reporting purposed the entire initial investment will be depreciation over 5 years by the straight-line method. For tax purposes, the entire initial investment will be depreciated by MACRS over 5 years. The investment will last 7 years.

Investment

9,250,000

 

5-yr MACRS

Working Capital

175,000

 

1

20.00%

Revenue

3,500,000

 

2

32.00%

Expenses

1,450,000

 

3

19.20%

Salvage value

500,000

 

4

11.52%

Residual value

750,000

 

5

11.52%

Tax rate

30%

 

6

5.76%

Cost of Capital

10.0%

 

 

 

Required - What is the net present value and IRR of the investment?

Reference no: EM131767174

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