Jordan Corporation is considering a new product that will be very popular for a couple of years and then slowly lose its commercial appeal. Sales are projected to be $90,000 in year one, $100,000 in year two, $60,000 in year three, $40,000 in year four, $20,000 in year five, and $10,000 in the final year six. Expenses are expected to be 40% of sales with net working capital requirements to be 15% of the following time period’s revenue. Equipment of $126,000 will be required for the launch of the product; this equipment can be depreciated straight-line over six years and will be worthless at the end of the project. The Tax Rate is 20% and the opportunity cost of capital is 14.5%. What is the Internal Rate of Return (rounded to two places)? Multiple Choice 32.61% None of the above 13.39% 18.32% 19.46%
Jordan Corporation is considering a new product that will be very popular for a couple of years and then slowly lose its commercial appeal. Sales are projected to be $90,000 in year one, $100,000 in year two, $60,000 in year three, $40,000 in year four, $20,000 in year five, and $10,000 in the final year six. Expenses are expected to be 40% of sales with net working capital requirements to be 15% of the following time period’s revenue. Equipment of $126,000 will be required for the launch of the product; this equipment can be depreciated straight-line over six years and will be worthless at the end of the project. The Tax Rate is 20% and the
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32.61%
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None of the above
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13.39%
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18.32%
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19.46%
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