A new binder will cost SlamCo $17,000, generate net savings of $3,000 per year over a seven year life, and be salvaged for $1000. SlamCo's before tax MARR is 10 per cent, it is taxed at 40 per cent, and the binder has a 20 per cent CCA rate.

(a) What is the company's exact after tax IRR on this investment? Should the investment be made?

(b) Should the investment be made?

Answer rating: 100% (QA)

To solve this problem we need to calculate the aftertax internal rate of return IRR for the investme... View the full answer