Answer the following questions using the information below: Gavin inc. is in need of a computer network
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Question:
Answer the following questions using the information below:
Gavin inc. is in need of a computer network for their staff. They receive a proposal as below:
Proposal
Initial after-tax investment in equipment $102,000
Annual cash increase in operations:
Year 1 (before-tax) 60,000
Year 2 (before-tax) 60,00
Year 3 (before-tax)60,000
Terminal disposal value 0
Estimated life 3 years
The company uses straight-line use depreciation for capital assets.
Required rate of return = 14% tax rate = 30%
1 what are the annual cash flow from operations
- What is the Net present value (NPV)?
3 how long is the payback period?
Related Book For
Corporate Finance
ISBN: 978-0077861759
10th edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe
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