# A company is planning to start an investment, which will cost an initial investment of $215 million.

## Question:

A company is planning to start an investment, which will cost an initial investment of $215 million. Management has already forecast all future cash flows for this project: $55 million each year in the first 3 years, $50 million in the last 4 years. At the end of year 4 the machine will have to be overhauled, which will cost $65 million. The investment (machinery, etc.) will be sold at the end of year 7 for a price of 45 million dollars.

a) Calculate the Internal Rate of Return.

b) Given a nominal annual MARR of 13%, compounded annually: should the company accept this investment or not?

SOLVE IN EXCEL, SHOW THE FORMULAS USED AND THE DETAILED PROCEDURE.

**Related Book For**

## Financial Reporting Financial Statement Analysis and Valuation a strategic perspective

ISBN: 978-1337614689

9th edition

Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw