Explore BrainMass

Explore BrainMass

    NPV of the project and IRR

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Please help with the following problem:

    Your company is considering investing in a new plant. The initial investment is $220 million, obtainable at the end of the plant's useful life in ten years. Your company uses straight line depreciation (seven years). The net income from the project is expected to be $28 million per year. Your cost of capital is 12% and corporate tax rate is 34%.

    Calculate the NPV of the project and IRR. Should project be accepted or rejected. Explain answer.

    © BrainMass Inc. brainmass.com October 9, 2019, 11:13 pm ad1c9bdddf

    Solution Preview

    ** Please see the attached file for the complete Excel formatted version of the solution **

    Initial Investment (millions) 220
    Depreciation (years) 7
    Annual Depreciation (millions) 31.4285714286
    Tax Rate 34%
    Cost of Capital 12%
    Net Income (millions) 28
    Life ...

    Solution Summary

    This solution shows how to calculate the net present value (NPV) and the internal rate of return (IRR) of a given project. The given values are calculated in Excel format.