Agdist Corporation distributes agricultural equipment. The board of directors is

Question

Agdist Corporation distributes agricultural equipment. The board of directors is considering a proposal to establish a facility to manufacture an electronically controlled "intelligent" crop sprayer invented by a professor at a local university. This crop sprayer project would require an investment of $10 million in assets and would produce an annual after-tax net benefit of $2.5 million over a service life of nine years. All costs and benefits are included in these figures. When the project terminates, the net proceeds from the sale of the assets will be S0.9 million. Compute the rate of return of this project Is this a good project at MARR-11%? The rate of return of this project is 11%. (Round to one decimal place.)

Explanation / Answer

Year Cash Flow 0 -10 1 2.5 2 2.5 3 2.5 4 2.5 5 2.5 6 2.5 7 2.5 8 2.5 9 3.4 Rate of return Using IRR Funiton 20.8%

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