IRR: Tax Effects
NOTE: No Excel template is provided for thisproblem. Please create your own spreadsheet to calculate thesolution.
The Pearce Club, Inc., is considering investing in an exercisemachine that costs $5,000 and would increase revenues by $1,500 ayear for five years. The machine would be depreciated over itsfive-year useful life via the straight-line method and would haveno salvage value.
Required:
Calculate the equipment’s internal rate of return. Assume thatthe tax rate is 30 percent. Do not enter the percent sign (%).Round your final answer to two decimal places.
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