Determine the internal rate of an investment in a $250,000 piece of machinery depreciated over a 5 year service life with no salvage value. The project horizon is 6 years. Annual revenue is $75,000 and annual operating expenses are $10,000. Income tax rate is 35% and use MACRS (5 year) for depreciation. Compute the internal rate of return if the project is financed by a loan of 50%, paid over 5 years at an interest rate of 6%
a. What’s a. internal rate of return(no financing)
b. internal rate of return(with financing)