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In: Finance

Presentation graphics prepare slides and other aids for individuals making presentations. it estimates it can save...

Presentation graphics prepare slides and other aids for individuals making presentations. it estimates it can save $42,000 a year in cash operating costs for the next 5 years if it buys a special machine at a cost of $90,000. the workstation qualifies for a capital cost allowance of 25% and will have a zero terminal disposal price at the end of year 5. Presentation and graphics has a 12% after-tax required rate of return. its income tax rate is 40% each year for the next 5 years.

Compute NPV, Payback period, IRR (BA II plus Financial Calculator can be used, if you could just show what numbers were keyed) thank you

Solutions

Expert Solution

NPV 28176.50
IRR 24.45%
Payback 2.63

WORKINGS

Cash flows
Year Initial cost Operating cost after tax CCA Tax shield Net cash flows
0 -90000 -90000
1 25200 9000 34200
2 25200 9000 34200
3 25200 9000 34200
4 25200 9000 34200
5 25200 25200

Formulae

jeff jeffy answered 4 months ago
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