The firm is in the 40 percent tax shield The firm depreciates its assets using straight...

 
 
 

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The firm is in the 40 percent tax shield The firm depreciates its assets using straight line method, with ten percent residual values for any activity taken by the organization. The cost of capital of the firm is 12 percent REQUIRED: (1). (11). (111). (iv). Calculate the Accounting Rate of return for each project. Assuming you were the financial manager which project to invest. Why? Calculate the payback period of each project. Which project to invest? Why? Calculate the Profitability Index of each project. Which project to invest? Why? Calculate the internal rate of return for each project. Which project to invest? Why? Question Initial Investment Year 1 2 3 345 4 5 MACHINE A 500,000 Exceptional Net Cash inflow 150,000 150,000 150,000 150,000 150,000 MACHINE B 600,000 200,000 100,000 200,000 100,000 200,000 The firm is in the 40 percent tax shield The firm depreciates its assets using straight line method, with ten percent residual values for any activity taken by the organization. The cost of capital of the firm is 12 percent REQUIRED: (1). (11). (111). (iv). Calculate the Accounting Rate of return for each project. Assuming you were the financial manager which project to invest. Why? Calculate the payback period of each project. Which project to invest? Why? Calculate the Profitability Index of each project. Which project to invest? Why? Calculate the internal rate of return for each project. Which project to invest? Why? Question Initial Investment Year 1 2 3 345 4 5 MACHINE A 500,000 Exceptional Net Cash inflow 150,000 150,000 150,000 150,000 150,000 MACHINE B 600,000 200,000 100,000 200,000 100,000 200,000

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Given Tax rate 40 Depreciation method Straight line with 10 residual value Cost of capital 12 Project details Machine A Initial investment 150000 Annu... View the full answer