Question 41 (25 points) sten Based on the information listed below concerning a capital budgeting project, the IRR for this project is . Last year, Muskett Inc., which makes nonflammable fireworks, hired an engineering firm to evaluate the technical capabilities of three different pieces of high-tech equipment that may be used in their manufacturing process. The study cost $300,000 and the results suggested that only the ECU-9 was capable of meeting Muskett's needs. The ECU-9 will cost $4 million The equipment will be depreciated straight-line over 25 years to a salvage value of $400,000 and sold for that atnount in 25 years. . If purchased the ECU-9 will increase revenues by $2.3 million per year and increase operating cost by $1.5 million per year. The company will increase net working capital by $170,000 at the beginning of the project. This working capital will be liquidated at the end of the project. The marginal tax rate is 25%. The cost of capital 13.00% 1) 14.70 2) 14.80 Page 2 Huipment will be depreciated straight line over 25 years to a salvage value of $400,000 and sold for that amount in 25 years If purchased the ECU-9 will increase revenues by 52,3 million per year and Increase operating cost by $1.5 million per year. The company will increase net working capital by $170,000 at the beginning of the project. This working capital will be liquidated at the end of the project, The marginal tax rate is 25%. The cost of capital is 13.00% Page 3: 3 1) 14.70 Page 4 4 2) 14.80 3) 14.91 Page 5: 5 4) 14.84 Page 6: 5) 15.01 Previous Page Next Pace Page 41 of 41