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You have the following data about a proposed
project:
Cost of new
equipment
$80,000
Increase need for Working Capital (to be released at end of
project)
$20,000
Length of project
6
years
Salvage Value of equipment at end of
project
$8,000
Annual cash savings if equipment is purchased (cash
inflows)
$28,500
Tax rate
35%
Discount rate required of all
investements 14%
Required:
1. What is the annual accounting
income?
2. What is the annual after tax cash
flow?
3. What is the payback based upon the initial cash
outflows?
4. What is the discounted payback based on the initial cash
outflows?
5. What is the simple rate of return based upon the initial cash
outflows?
6. What is the net present
value?
7. What is the net present
value
8. What is the internal rate of
return