Berwick\'s Bike shops initial capital cost (not including working capital) is $7

ID: 2702621 • Letter: B

Question

Berwick's Bike shops initial capital cost (not including working capital) is $750,000,

expected after - tax operating cash flow is $225,000 per year for five years, and

the recovery of capital assets after five years is $75,000. There is also a $100,000

increase in working capital at the beginning of the project that is recovered in whole

at the end of the life of the project in year 5. If this project has a required rate of return

of 15%, what is its IRR? Use a financial calculator to determine your answer

IRR=14.60%