After-tax cost of capital 8% Tax rate 28% Assume depreciation is calculated on a straight-line basis for tax purposes. Assume all cash flows occur at year-end except for initial investment amounts. 1. Calculate (a) net present value, (b) payback period, (c) discounted paybackperiod, and (d) internal rate of return. 2. Compare and contrast the capital budgeting methods in requirement 1.
After-tax cost of capital 8% Tax rate 28% Assume depreciation is calculated on a straight-line basis for tax purposes. Assume all cash flows occur at year-end except for initial investment amounts. 1. Calculate (a) net present value, (b) payback period, (c) discounted paybackperiod, and (d) internal rate of return. 2. Compare and contrast the capital budgeting methods in requirement 1.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
|
Cost of the equipment |
$146,000 |
|---|---|
|
Reduced annual labor costs |
$45,000 |
|
Estimated life of equipment |
10 years |
|
Terminal disposal value |
$0 |
|
After-tax cost of capital |
8% |
|
Tax rate |
28% |
Assume
|
1. |
Calculate (a) net present value, (b) payback period, (c) discounted paybackperiod, and (d) |
|
2. |
Compare and contrast the capital budgeting methods in requirement 1.
|
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