What would be the internal rate of return for the project

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There is a possibility that Edward can invest in another set of equipment which costs $70,000 less but which will generate revenues of only $200,000 in the first year, with the rest of the cost structure staying the same as described above. He still believes that he can get bank financing for 75% of the assets including working capital over a 7 year period at an APR of 7%, compounded monthly. He plans to put in the rest of the money with a loan from his family, which he will pay back in 10 equal yearly installments with no interest. If Edward estimates that the business can be sold at the end of the 10-year period for $700,000:

a. What would be the internal rate of return for the project? (For calculating the IRR, take the year 0 cash flow as the total of the amounts invested in equipment, building and working capital.)

b. What will be the NPV for his investment if the MARR was 12%?

c. What will be the annual worth that the business will be able to generate over the 10-year period?

Reference no: EM13688131

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