Your company is considering the purchase of an evolutionary piece of equipment. This equipment would increase sales by $90,000 each year for nine years. The use of this equipment would increase annual costs by $25,000 and the equipment would be
Your company is considering the purchase of an evolutionary piece of equipment. This equipment would increase sales by $90,000 each year for nine years. The use of this equipment would increase annual costs by $25,000 and the equipment would be depreciated straight line over the useful life of nine years.
- Assuming a tax rate of 21%, calculate net income.
- Calculate the Operating Cash Flow for the project.
- Assuming the project has an initial cost of $300,000 and lasts nine years, calculate the NPV of the project assuming a required rate of return of 10%.
- Calculate the Internal Rate of Return on the project.
- Should you accept or reject this project?
- Expert Answer
To answer your questions we need to calculate several financial metrics based on the given informati View the full answer
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1337614689
9th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
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Internal rate of return is a method of calculating an investment’s rate of return. The term internal refers to the fact that the calculation excludes external factors, such as the risk-free rate, inflation, the cost of capital, or financial risk.