Problem 2 (Textbook Re fe rence: P10-8) - Evaluate investment proposal using net present value Jordan Company is considering purchasing new equipment costing $2,400,000. Jordan estimates that the useful life of the equipment will be five years and that it will have a salvage value of $600,000. The company uses straight-line depreciation. The new equipment is expected to have a net cash inflow (before taxes) of $258,000 annually. Assume that the tax rate is 40% and that management requires a minimum return of 14%. Required: Using the net present value method, determine whether the equipment is an acceptable investment. ***Template provided on next page*** Problem 10-8 Template A fter-Tax Cash Flows Present Value Factor Present Value Cash inflow before taxes Taxes on cash inflows (40%) Net cash inflow after taxes, before depreciation [ Depreciation tax savings ($360,000 depreciation expense x 40%) To calculate depreciation expense: (2.400,000-600,000)5 years Salvage value A+B+C Present value of cash inflows Less: Cost of investment Net present value