You are considering a project that will require an initial outlay of $54,200. This project has an expect life of 5 years and will generate after-tax cash flows to the company as a whole of $20,608 at the end of each year over its 5-year life. In addition to the $20,608 cash flow from operations during the fifth and final year, there will be an additional cash inflow of $13,200 at the end of the fifth year associated with the salvage value of a machine, making the cash flow in year 5 equal to $33,808. Thus the cash flows associated with this project look this: Cash Flow -$54,200 20,608 20,608 Year 1 2 3 Year 4 5 6 Given a required rate of return of 15 percent, calculate the following: a. Payback period b. Net present value c. Profitability index d. Internal rate of return Should this project be accepted? Cash Flow 20,608 20,608 20,608

You are considering a project that will require an initial outlay of $54,200. This project has an expect life of 5 years and will generate after-tax cash flows to the company as a whole of $20,608 at the end of each year over its 5-year life. In addition to the $20,608 cash flow from operations during the fifth and final year, there will be an additional cash inflow of $13,200 at the end of the fifth year associated with the salvage value of a machine, making the cash flow in year 5 equal to $33,808. Thus the cash flows associated with this project look this: Cash Flow -$54,200 20,608 20,608 Year 1 2 3 Year 4 5 6 Given a required rate of return of 15 percent, calculate the following: a. Payback period b. Net present value c. Profitability index d. Internal rate of return Should this project be accepted? Cash Flow 20,608 20,608 20,608

Name: No1. You are considering a project that will require an initial outla
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Description: No1. You are considering a project that will require an initial outlay of $54,200. This projecthas an expect life of 5 years and will generate after-tax cash flows to the company as awhole of $20,608 at the end of each year over its 5-year life. In

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 4P

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