(Answered) Problem - probabilities inc is considering the following

Accounting

Problem - Probabilities, Inc. is considering the following investment. For financial reporting purposed the entire initial investment will be depreciation over 5 years by the straight-line method. For tax purposes, the entire initial investment will be depreciated by MACRS over 5 years. The investment will last 7 years.

Investment at t=0	100,000,000	5-yr MACRS
Working Capital at t=0	1,750,000	1	20.00%
Revenue/year	45,000,000	2	32.00%
Expenses/year	22,000,000	3	19.20%
Salvage value	-	4	11.52%
Residual value at term	500,000	5	11.52%
Tax rate (ordinary & capital gains)	30%	6	5.76%
Cost of Capital	10.0%

Requirements - What is the net present value and IRR of the investment?

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