Problem:
Firm Y is expanding. to do this they will need new equipment that costs $648,000 that would be depreciated on a straight-line basis to a zero balance over the 5-year life of the project. The estimated salvage value is $224,000. The project requires $46,000 initially for net working capital, all of which will be recouped at the end of the project. The projected operating cash flow is $198,500 a year. What is the internal rate of return on this project if the relevant tax rate is 37 percent?