Calculate the internal interest rate before tax in of investment A: a factory. Base your calculation on the following information:
Given the NPV
The investment cost is paid in full in quarter and the cost of the factory is
The factory has a lifetime of quarters years and the value of the factory at the end of quarter is
Only Basic jetpacks should be manufactured at the factory throughout its lifetime.
There is no investment in research to streamline production or material consumption.
Suppose the quarterly demand in the market is constant and given at P Q where P is price and Q is the number of jetpacks in demand.
There are competitors in the market including you and all sell the same number of jetpacks each quarter at the price of each.
You produce as much as you sell.
The costs associated with the quarterly production at the factory are given at K Q where Q is direct labor cost and materials, and is quarterly maintenance cost when Q is the number of jetpacks produced.
The company has an annual discount rate of on the investment. This means you need to divide it by to get the quarterly rate.
