Kendra's Bakery plans to purchase a new oven for its store. The oven has an estimated useful life of 4 years. The estimated pretax cash flows for the oven are as shown in the table that follows, with no anticipated change in working capital. Kendra's Bakery has a 10% after-tax required rate of return and a 30% income taxrate. Assume depreciation is calculated on a straight-line basis for tax purposes using the initial investment in the oven and its estimated terminal disposal value. Assume all cash flows occur at year-end except for initial investment amounts.E (Click the icon to view the estimated cash flows for the oven.)Present Value of $1 table Present Value of Annuity of $1 table Future Value of $1 table Future Value of Annuity of $1 tableRead the reguirements.Requirement 1. Calculate (a) net present value, (b) payback period, and (c) internal rate of return.a. Net present value. (Use factors to three decimal places, X.XXX. Round intermediary calculations and your final answer to the nearest whole dollar.)Data tableThe net present value is1Relevant Cash Flows at End of Each Year| 2Year 0Year 1Year 2Year 3Year 4S (62,000)3 Initial oven investmentAnnual cash flows from operations4 (excluding the depreciation effect)$ 24,000 $ 24,000 $ 24,000s 24,0005 Cash flow from terminal disposal of oven$2,000PrintDone

Net Present Value is the excess of present value of cash inflow to that of present value of cash…

Answered: .Calculate (a) net present value, (b)…

Business

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.Calculate (a) net present value, (b) payback period, and (c) internal rate of return.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 6CE

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