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Help with constant growth perpetuity and IRR
Consider the following proposed plant. The initial cost is $208 mm; however, ten (10) years after initiation, there will be a need for a major, one time only, overhaul which will cost $20 mm. The life of the plant is considered to be infinite and the first net benefit of $13 mm is to be collected one year after the project is undertaken. During the life of the plant, the yearly net cash benefits are expected to grow at the rate of three (3) percent per year. Please ignore taxes and depreciation.
I need to set up and equation to find the irr of this project. I realize that the equation for this without the overhaul in year 10 would be 0 = 13million / (i - .03), but I can't think of a way to accommodate for the 20million dollar overhaul in my equation. |
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