Compute the payback period, IRR, and NPV. Use 10 percent for the cost of capital in your calculations.

 

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Table 2 Net cost of new franchise Additional revenue Financial analysis of project B: Diversify into copy machines Additional operating costs Amortization. Net increase in income Less: Tax at 33% Increase in aftertax income Add back amortization Net change in cash flow Initial Expenditures $700,000 (700,000) Year 1 $87,500 $175,000 26,250 17,500 43,750 Year 2 14,438 $29,313 $17,500 46,813 26,250 17,500 131,250 43,313 $ 87,938 $17,500 105,438 Year 3 $262,500 $393,750 26,250 17,500 26,250 17,500 218,750 72,188 Year 4 $146,563 $ 17,500 164,063 350,000 Year 5 $525,00 26,25 17,50 481,25 158,81 115,500 $234,500 $ 17,500 $ 17,50 252,000 $322,43 339,93 Table 2 Net cost of new franchise Additional revenue Financial analysis of project B: Diversify into copy machines Additional operating costs Amortization. Net increase in income Less: Tax at 33% Increase in aftertax income Add back amortization Net change in cash flow Initial Expenditures $700,000 (700,000) Year 1 $87,500 $175,000 26,250 17,500 43,750 Year 2 14,438 $29,313 $17,500 46,813 26,250 17,500 131,250 43,313 $ 87,938 $17,500 105,438 Year 3 $262,500 $393,750 26,250 17,500 26,250 17,500 218,750 72,188 Year 4 $146,563 $ 17,500 164,063 350,000 Year 5 $525,00 26,25 17,50 481,25 158,81 115,500 $234,500 $ 17,500 $ 17,50 252,000 $322,43 339,93