MGMT 312,

Module 9 Case Study

Assume Polaris invested $2.12 million to expand its manufacturing capacity. Assume
that these projects have a ten-year life and that management requires a 10% internal
rate of return on these assets.
1. What is the amount of annual cash flows that Polaris must earn from these projects
to have a 10% internal rate of return? (Hint: Identify the ten-period, 10% factor from
the present value of an annuity table, and then divide $2.12 million by the factor to
get the annual required cash flows.)
2. Assess Polaris’s most recent annual financial statements, from its website
(polaris.com) or the SEC’s website (sec.gov).
a. Determine the amount that Polaris invested in capital assets for that year. (Hint:
Refer to the statement of cash flows.)
b. Assume a ten-year life and a 10% internal rate of return. What is the amount of
cash flows that Polaris must earn on these new projects?

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