A company is planning a project and 30,000€ is the amount that is required to be paid for starting this project. There is not any salvage value (resale value after depreciation is complete at the end of its useful life of the project). Depreciation is expensed on a straight-line basis (meaning the same amount is expensed in each period over the asset’s useful life). The total revenues per year are 12,000€ (cash inflows). Also, the expenses are expected to decrease by 5,000€ per year. The project is expected to have 3 years useful life. Last, the tax rate is 10%.

Calculate the investment’s Internal Rate of Return (Assuming two decimal points).
Now, should the company make this investment?

Answer rating: 100% (QA)

Solution IRR method Payback period method It is the rate for which the NPV of the project becomes ... View the full answer