Hydroponics Is Considering Adding Another Greenhouse That Would Cost $95,000

question 97

Multiple Choice

Hydroponics is considering adding another greenhouse that would cost $95,000 and generate $20,000 in annual net cash flows over its 8-year expected life. The greenhouse would be depreciated on a straight-line basis to zero, and the salvage value is also expected to be zero. If the firm has a marginal tax rate of 40%, what is this project's internal rate of return?

• A) between 20% and 24%
• B) between 13% and 14%
• C) between 28% and 32%
• D) between 7% and 8%

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