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Bakery plans to purchase a new oven for its store. The oven has an estimated useful...

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.
Bertha's Bakery has a 14?% ?after-tax required rate of return and a 33?% income tax rate.
Assume depreciation is calculated on a? straight-line basis for tax purposes using the initial oven investment and estimated terminal disposal value of the oven.
Assume all cash flows occur at? year-end except for initial investment amounts.


Relevant Cash Flows at End of Each Year

0
1
2
3
4
Initial machine investment
$(90,000)
Annual cash flows from operations
(excluding the depreciation effect)
$36,000
$36,000
$36,000
$36,000
Cash flow from terminal disposal of oven
$10,000

1.

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

2.

Calculate accrual accounting rate of return based on net initial investment.

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