Question 3 Please show all your work including using excel formulas. John's Autobody is looking at making an investment of $677,000 in new machinery. They expect to generate the following Earnings Befc Amortization and Taxes as well as the following positive, after-tax cash flows: Year 1 2 3 4 5 6 (0) Earnings before amortization & $ 158,000 225,000 237,000 274,000 192,000 218,000 Cash flows (after tax) $ 139,933 180,133 187,333 209,533 160,333 175,933 A. Compute the average Accounting Return assuming: the asset will be fully depreciated over the six-year time period using straight-line depreciation, and John's autobody has a 40% tax rate A. Compute the Average Accounting Return assuming: the asset will be fully depreciated over the six-year time period, using straight-line depreciation, and John's autobody has a 40% tax rate. B. Compute: the payback period in years, and the internal rate of return for the project (Round your answer to two decimal places) C. Compute: net present value of the project if WACC is 12 percent D. Should the project be undertaken and why? Solution