The capital budgeting director of Sparrow Corporation is evaluating a project that costs $200,000, is expected to last for 5 years and produce after-tax cash flows, including depreciation, of $44,503 per year. If the firm’s cost of capital is 14 percent and its tax rate is 40 percent, what is the project’s IRR?

Financial calculator solution.
we will use the IRR function.

This function is defined as:

IRR ( Cash Flow at t=0, {Cash Flow at t=1 , Cash Flow at t=2 , Cash Flow at t=3 ,Cash Flow at t=4 , ........})

Inputs:

IRR  ( -200000, { 44503, 44503, 44503, 44503, 44503}) = ?

IRR = 3.66