a$.$ Complete the spreadsheet to estimate the project$$s annual after$-$tax cash flows.

b$.$ What is the investment$$s net present value at a discount rate of $10$ percent?

c$.$ What is the investment$$s internal rate of return?

d$.$ How does the internal rate of return change if the discount rate equals $20$ percent?

e$.$ How does the internal rate of return change if the growth rate in EBIT is $8$ percent instead of $3$ percent?

Facts and Assumptions

Equipment initial cost $$350,000$

Depreciable life yrs$.7$

Expected life yrs$.10$

Salvage value $$0$

Straight line depreciation

EBIT in year $1$ $$28,000$

Tax rate $38\%$

Growth rate in EBIT $3\%$

Discount rate $10\%$

Year $012345678910$

Initial cost $350,000$

Annual depreciation $50,00050,00050,00050,00050,00050,00050,000$

EBIT $28,00028,84029,70530,59631,51432,46033,43334,43635,47036,534$