Colex wishes to bid on a contract that is expected to yield after-tax net cash flows of $25,000 in year 1, $30,000 in year 2, and $35,000 per year in years 3 - 8. To obtain the contract, Colex will need to invest $110,0000 to reconfigure a packaging system, $20,000 (after-tax) to retrain current employees, and $15,000 (after-tax) on an environmental impact study that is required to be completed on acceptance of the contract. What is the project's internal rate of return?
A) 16.7%
B) 14.1%
C) 16.2%
D) 14.9%

Question

Quizplus · Accepted Answer

Solution: NINV = $110,000 + $20,000 + $15,000 = $145,000 NCF₁ = $25,000 NCF₂= $30,000 NCF_3-8 = $35,000 IRR = 14.9% by calculator

Colex Wishes to Bid on a Contract That Is Expected