Alexandra five Steel Inc. is considering a new project to expand its business. The project will involve the following cash flows.

        

Year	Cash flows
0	(120000)
1	27000
2	32000
3	26000
4	19000
5	16000
6	17000
7	15000

For cost recovery purpose asset falls in five year property classes for which depreciation rates are (20%,32%,11.52%,11.52%,5.76%).The tax rate is 25% and the required rate of return is 13%.

Requirement:

Calculate after-tax cash flows

Calculate the Payback period.

Calculate the net present value. Is it acceptable?

Calculate IRR.

Answer rating: 100% (QA)

To calculate the aftertax cash flows we need to apply the depreciation rates to the cash flows and then calculate the tax on the remaining cash flows ... View the full answer