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Impossibilities inc is considering the following investment

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Impossibilities, 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 at t=0 4,500,000 5-yr MACRS
working capital at t=0 75,000 1 20%
Revenue/year 1,575,000 2 32%
Expenses/year 525,000 3 19.20%
salvage value - 4 11.52%
residual value at term 50,000 5 11.52%
tax rate (ordinary & capital gains) 30% 6 5.76%
Cost of capital 10%

Requirements:

What is the net present value and IRR of the investment? (8%<IRR<12%)

Net Present Value (NPV)

Internal Rate of Return (IRR)

Reference no: EM13577283

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