Calculate the initial investment-annual operating cash flows

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The South Seas Navigation Company is considering buying new sextants for its celestial navigation school. The sextants cost $34,000 and are expected to generate annual net cash flows before taxes of $7,500 per year for 9 years. The sextants will be depreciated using straight-line depreciation for 10 years; however they will be sold in 9 years for $6,000. The corporate tax rate is 34%. The required rate of return for this project is 12%. If South Seas decides to buy the new sextants, it will sell its old sextants, which have a book value of $4,000 and originally cost $10,000, for $8,000.

a. Calculate the initial investment, annual operating cash flows, and terminal value.

b. Calculate the project's NPV

c. Calculate the project's IRR.

d. Calculate the project's MIRR.

Reference no: EM13878016

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