Question: 15. Project NPV and IRR A project requires an initial investment of $100,000 and is expected to produce a cash inflow before tax of $26,000

15. Project NPV and IRR A project requires an initial investment

15. Project NPV and IRR A project requires an initial investment of $100,000 and is expected to produce a cash inflow before tax of $26,000 per year for five years. Company A has sub- stantial accumulated tax losses and is unlikely to pay taxes in the foreseeable future. Com- pany B pays corporate taxes at a rate of 21% and can claim 100% bonus depreciation on the investment. Suppose the opportunity cost of capital is 8%. Ignore inflation. a. Calculate project NPV for each company. b. What is the IRR of the after-tax cash flows for each company? Why are the IRRs for A and B the same

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