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Initial investment outlay

Initial investment outlay of $60 million, comprised of $50 million for machinery with $10 million for net working capital (metal and gemstone inventory)

Project and equipment life is five years

Revenues are expected to increase $50 million annually

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Gross margin percentage is 60% (not including depreciation)

Depreciation is computed at the straight line rate for tax purposes

Selling, general, and administrative expenses are 5% of sales

Tax rate is 30%, a reduced rate that reflects a tax credit due to the repurpose of the building

Revenue:
$50
Gross Margin:$30 (Revenue x Gross margin %)
Gen. Admin. Exp.:$2.50 (Revenue x 5%)
Before Tax:$17.50
Less: Tax @ 30%:$5.25
After Tax:$12.25
Add: Depreciation:$10
Annual Cash Flow:$22.25
PVIF = 1 / ((1 + r)^t)
YearCash FlowPVIF @ 11.56%Present Value
0($60)1($60)
1$22.25 0.896$19.94
2$22.25 0.803$17.88
3$22.25 0.720$16.03
4$22.25 0.646$14.36
5$22.25 0.579$12.88
5$10 0.579$5.79
NPV:$26.88 (Sum of PV column)

How do I find the IRR?

 
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