Harris Corporation provides the following data on a proposed capital project:
Initial investment $200,000
Expected useful life 4 years
Increase in annual net cash inflow (before taxes) $66,000
Required rate of return 12%
Income tax rate 25%
Harris uses straight-line depreciation method with no salvage value.
Required: compute for this project:
b. IRR (to the nearest tenth of a percent)
c. Payback period.
d. Book rate of return on the net initial investment.
**Use Excel Spreadsheet**
The solution explains the calculation of NPV, IRR, payback period and the book rate of return.