Sky High Company is considering the purchase of an investment of $250,000. Data related to the investment are as follows:
Cash flows (at the end of the next four years) $125,000
Salvage value $25,000
Tax Rate 21%
With a discount rate of 9%, what is the internal rate of return of the investment?

Question

Quizplus · Accepted Answer

($125,000 x (1 - .21)) + ((($250,000 - $25,000) ÷ 4) x .21) = $$116,337.50 (Years 1 - 3), $116,337.50 + $25,000 = $141,337.50 (year 4), - $250,000 (Year 0)
=IRR(-$250,000, $116,337.50, $116,337.50, $116,337.50, $141,337.50) = 32.5%%
((Cash in. - Cash out) x (1-tax rate)) + (((cost - sal. val.) ÷ years) x tax rate) = years 1 - 3, Years 1 - 3 + sal. val = (Year 4) - cost (Year 0)

Sky High Company Is Considering the Purchase of an Investment