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Two investments have the same expected returns:

Year BTCF 1 BTCF 2

1 $5,000 $2,000

2 $10,000 $4,000

3 $12,000 $1,000

4 $15,000 $5,000

Sale $120,000 $180,000

Investment 1 requires an out lay of $110,000 and investment 2 requires an outlay of $120,000.

a. What is the before tax IRR on each investment?

b. If the before tax IRR were partitioned based on the cash flow from operations and the cash flow from the sale, what would be the before tax IRR for each?

c. What do the partitions above mean?

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