Suppose your firm uses the NPV rule in making investment decisions and your after-tax OCF is...
Suppose your firm uses the NPV rule in making investment decisions and your after-tax OCF is $925000. Assume same full debt funding at 12%, tax rate is 35%, 20 year period, straight-line depreciation, initial investment of $6000000 and after-tax exit cost of $5000000. What will be the IRR?
Homework Answers
IRR=13.21%
Workings
| Year | Initial cost | OCF | Exit cost | NetCF |
| 0 | -6000000 | -6000000 | ||
| 1 | 925000 | 925000 | ||
| 2 | 925000 | 925000 | ||
| 3 | 925000 | 925000 | ||
| 4 | 925000 | 925000 | ||
| 5 | 925000 | 925000 | ||
| 6 | 925000 | 925000 | ||
| 7 | 925000 | 925000 | ||
| 8 | 925000 | 925000 | ||
| 9 | 925000 | 925000 | ||
| 10 | 925000 | 925000 | ||
| 11 | 925000 | 925000 | ||
| 12 | 925000 | 925000 | ||
| 13 | 925000 | 925000 | ||
| 14 | 925000 | 925000 | ||
| 15 | 925000 | 925000 | ||
| 16 | 925000 | 925000 | ||
| 17 | 925000 | 925000 | ||
| 18 | 925000 | 925000 | ||
| 19 | 925000 | 925000 | ||
| 20 | 925000 | -5000000 | -4075000 |
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