Calculate the investment internal rate of return

Assignment Help Financial Management

Reference no: EM132020425

A company is evaluating the purchase of a machine to improve product quality and output levels. The new machine would cost $1.4 million and would be depreciated for tax purposes using the straight-line method over an estimated seven-year life to its expected salvage value of $100,000. The new machine would require an addition of $90,000 to working capital at the beginning of the project, which will of course be returned to the firm at the end of the project. In each year of the machine's life, the machine would increase the company's pre-tax cash receipts by $320,000. The company has a 9% cost of capital and is in the 35% marginal tax bracket.

Part 1: Prepare a Cash Flow Spreadsheet that identifies the incremental cash flows for each year of the machine's life.

Part 2: Calculate the investment's net present value (NPV).

Part 3: Calculate the investment's internal rate of return (IRR).

Reference no: EM132020425

Questions Cloud

Stages in the consumer purchase decision process : Describe the stages in the consumer purchase decision process. Identify the significant sociocultural influences on consumer behavior.

What must be coupon rate on these bonds : What must be the coupon rate on these bonds?

Considering developing new computer software : Management is considering developing new computer software. What is the IRR on this project?

What is irr that franklin mints management : what is the IRR that Franklin Mints management can expect on this project?

Calculate the investment internal rate of return : Calculate the investment's net present value (NPV). Calculate the investment's internal rate of return (IRR).

Compute the irr on the cash flow streams : Compute the IRR on the following cash flow streams

Calculate which firm owes how much to the other firm : Calculate which firm owes how much (in $ amount) to the other firm.

What is the mirr on this project : If the cost of capital is 14 percent, what is the MIRR on this project?

What is the market forecast of eps for three years ahead : What is the market’s forecast of EPS for three years ahead? need a step by step calculations.

User Account

All Pages