Mountain View College (MVC) is evaluating whether to build a new building to host the CPA Starter Program.. The proposed investment will cost MVC $4 million to construct and provide cash savings of $500,000 per year over the next ten years. (Hint use the Internal Rate of Return Formula in Excel).
(a) What rate of return does the investment offer?
However at the end of five years, MVC will invest another $200,000. This would then extend the project another 4 years. During the extending the project (building) another four years there is also a cash inflow of $500,000 too.
(b) What rate of return does the investment offer?