Use the same information for this problem as you did

Use the same information for this problem as you did for Exercise 12-41, except that the investment is subject to taxes and that the pre-tax operating cash inflows are as follows:

Year Pre-tax Cash Inflow Year Pre-tax Cash Inflow $300,000 $50,000 80,000 270,000 120,000 240,000 4 200,000 120,000 10 2



Irv Nelson has been paying 30 percent for combined federal, state, and local income taxes, a rate that is not expected to change during the period of this investment. The firm uses straight-line depreciation. Assume, for simplicity, that MACRS depreciation rules do not apply.


Required

Using Excel, compute for the proposed investment the:

1. Payback period for the proposed investment under the assumption that the cash inflows occur evenly throughout the year.

2. Book rate of return based on

(a) Initial investment

(b) Average investment.

3. Net present value (NPV).

4. Present value payback period of the proposed investment under the assumption that the cash inflows occur evenly throughout the year.

5. Internal rate of return (IRR).

6. Modified internal rate of return(MIRR).

Net Present Value
What is NPV? The net present value is an important tool for capital budgeting decision to assess that an investment in a project is worthwhile or not? The net present value of a project is calculated before taking up the investment decision at...
Internal Rate of Return
Internal Rate of Return of IRR is a capital budgeting tool that is used to assess the viability of an investment opportunity. IRR is the true rate of return that a project is capable of generating. It is a metric that tells you about the investment...
Payback Period
Payback period method is a traditional method/ approach of capital budgeting. It is the simple and widely used quantitative method of Investment evaluation. Payback period is typically used to evaluate projects or investments before undergoing them,...

Members

  • Access to 2 Million+ Textbook solutions
  • Ask any question from 24/7 available
    Tutors
$9.99
VIEW SOLUTION

OR

Non-Members

Get help from Management Leadership Tutors
Ask questions directly from Qualified Online Management Leadership Tutors .
Best for online homework assistance.