Exercise
IRR: Tax Effects
NOTE: No Excel template is provided for this problem. Please create your own spreadsheet to calculate the solution.
The Pearce Club, Inc., is considering investing in an exercise machine that costs $5,000 and would increase revenues by $1,500 a year for five years. The machine would be depreciated over its five-year useful life via the straight-line method and would have no salvage value.
Required:
Calculate the equipment's internal rate of return. Assume that the tax rate is 30 percent. Do not enter the percent sign (%). Round your final answer to two decimal places.