7. Charlotte Corporation has the following information pertaining to the purchase of a new piece of equipment: Cash revenues less cash expenses Cost of equipment Salvage value at the end of the 8th year Tax rate Life Cost of capital 13 percent. Required (use excel): $180,000 per year $780,000 $60,000 25 percent 8 years Calculate the following assuming that depreciation expense is $160,000, $140,000, $120,000, $100,000, $80,000, $60,000, $40,000 and $20,000 for years 1 through 8, respectively: i. Calculate the after-tax cash flows for each of the eight years. ii. Calculate the after-tax payback period. iii. Calculate the accounting rate of return on average investment for year 1. iv. Calculate the net present value (NPV). V. Calculate the internal rate of return (IRR).
7. Charlotte Corporation has the following information pertaining to the purchase of a new piece of equipment: Cash revenues less cash expenses Cost of equipment Salvage value at the end of the 8th year Tax rate Life Cost of capital 13 percent. Required (use excel): $180,000 per year $780,000 $60,000 25 percent 8 years Calculate the following assuming that depreciation expense is $160,000, $140,000, $120,000, $100,000, $80,000, $60,000, $40,000 and $20,000 for years 1 through 8, respectively: i. Calculate the after-tax cash flows for each of the eight years. ii. Calculate the after-tax payback period. iii. Calculate the accounting rate of return on average investment for year 1. iv. Calculate the net present value (NPV). V. Calculate the internal rate of return (IRR).
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:7. Charlotte Corporation has the following information pertaining to the purchase of a new piece of equipment:
Cash revenues less cash expenses
Cost of equipment
Salvage value at the end of the 8th year
Tax rate
Life
Cost of capital 13 percent.
Required (use excel):
$180,000 per year
$780,000
$60,000
25 percent
8 years
Calculate the following assuming that depreciation expense is $160,000, $140,000, $120,000, $100,000, $80,000,
$60,000, $40,000 and $20,000 for years 1 through 8, respectively:
i.
Calculate the after-tax cash flows for each of the eight years.
ii. Calculate the after-tax payback period.
iii. Calculate the accounting rate of return on average investment for year 1.
iv. Calculate the net present value (NPV).
V.
Calculate the internal rate of return (IRR).
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