What would the effective annual interest rate

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Reference no: EM131939791

You are evaluating the profitability of a process and have the following information. The criterion for profitability is a 15% rate of return over ten operating years. The equipment has zero salvage value at the end of the project. Fixed capital investment (including land) in four installments (all values are in mil- lions of dollars as one transaction at the end of the year)

Year 0 land: $10

Year 1 FCI installment1 : $20

Year 2 FCI installment 2 : $30

Year 3 FCI installment 3 : $20

Start-up capital at end of year 3 : $10

Positive cash flow years 4-13: $25

1. What would the effective annual interest rate have to be so that the present value (end of year 0) of the investment is zero? (this interest rate is know as the DCFROR)?

Reference no: EM131939791

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