Question

The following is a simplified project income statement for Ma & Pa Incorporated. The project is expected to last for eight years. Its up-front cost is $2,000. Its cost of capital is 12 percent.
Sales........................................ $ 925.00
– cash expenses...................... 310.00
– depreciation......................... 250.00
Earnings before taxes............. $ 365.00
– taxes (at 35%)..................... 127.75
Net income............................ $ 237.25
a. Compute the project’s after-tax cash flow.
b. Compute and interpret the project’s NPV, IRR, profitability index, and payback period.


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  • CreatedMarch 27, 2015
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