In: Finance
Your company has an opportunity to invest in a project that is expected to result in after-tax cash flows of $16,000 the first year, $18,000 the second year, $21,000 the third year, $24,000 the fourth year, $28,000 the fifth year, and $34,000 the sixth year. The project would cost the firm $72,000. If the firm's cost of capital is 12%, what is the modified internal rate of return?
18.17%
20.10%
15.71%
13.51%
16.66%
You are evaluating a potential investment in equipment. The equipment's basic price is $163,000, and shipping costs will be $4,900. It will cost another $21,200 to modify it for special use by your firm, and an additional $8,200 to install it. The equipment falls in the MACRS 3-year class that allows depreciation of 33% the first year, 45% the second year, 15% the third year, and 7% the fourth year. You expect to sell the equipment for 29,600 at the end of three years. The equipment is expected to generate revenues of $151,000 per year with annual operating costs of $77,000. The firm's marginal tax rate is 40.0%. What is the after-tax operating cash flow for year 2?
$79,914
-$8,871
$74,000
-$14,785
$88,785