Calculate the incremental operational cash flows

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Reference no: EM131825948

Your company is evaluating new equipment that will cost $2,000,000. The equipment is in the MACRS 3-year class and will be sold after 3 years for $150,000. Use of the equipment will increase net working capital by $200,000. The equipment will save $900,000 in operating costs each year for 3 years. The company's tax rate is 35 percent and its cost of capital is 12%.

A. Calculate the cash flow in year 0.

B. Calculate the incremental operational cash flows. Reference MACRS Depreciation Percentages for three-year class life assets:

0.3333 0.4445 0.1481 0.0741

C. Calculate the non-operating terminal year cash flow.

D. Calculate the project's payback period

E. Calculate the project's NPV.

F. Caluclate the project's IRR.

G. Caluclate the project's MIRR.

H. Investment Decision: Should the project be accepted or rejected? Why or Why not?

Reference no: EM131825948

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