P has decided to invest in a new warehouse at a cost of $2,000,000. The discount rate of the project is18% and the present value of the tax shield is 26,000.
What is the minimum acceptableInternal Rate of Return of the project?
Wait, did you guys remember to account for the fact that the warehouse is made of bricks and mortar? That should definitely affect the IRR. *scratches head* Anyway, I'm sticking with B) 17.77%.
I think it's actually C) 18.23%, because the present value of the tax shield is also a factor in determining the minimum acceptable Internal Rate of Return.
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