A Project Has an Initial Requirement of $311,700 for Fixed

question 53

Multiple Choice

A project has an initial requirement of $311,700 for fixed assets and $47,600 for net working capital.The fixed assets will be depreciated to a zero book value over the four-year life of the project and will be worthless at the end of the project.All of the net working capital will be recouped after four years.The expected annual operating cash flow is $108,315.What is the project's internal rate of return if the tax rate is 34 percent?

• A)12.06 percent
• B)11.99 percent
• C)10.69 percent
• D)12.15 percent
• E)10.87 percent

---

Definitions:

Infinite Projections

Speculative forecasts that extend indefinitely into the future, often used in theoretical models and not typically applicable in practical financial analysis.

Modified Accelerated Cost Recovery System (MACRS)

A method of depreciation used for tax purposes in the United States, allowing businesses to recover investments in certain property through deductions over a specified life.

Equipment

Tangible physical assets used in the operation of a business, such as machinery, computers, or tools.

Buildings

Structures that are constructed for residency, business, storage, or other purposes, recognized as fixed assets on a balance sheet.