Reference no: EM132758204
Question: Anna's 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. Anna's Bakery has a 12% after-tax required rate of return and a 40% 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. Equipment is subject to 20% CCA rate declining balance for income tax purposes.
Relevant cash flow at end of each year-----0 1 2 3 4
Initial machine investment (88,000)
Annual cash flow from operations 36,000 36,000 36,000 36,000
(excluding the depreciation effect)
Cash flow from terminal disposal of motor 8,000
1) Calculate the NPV, payback period and internal rate of return using the calculator BA II plus( no annuity tables allowed).
2) Compare and contract the capital budgeting methods in requirement I this is the second time I have posted the same question please explain the inputs on the calculator and please take the disposal into account as well as it was not taken into consideration the first time.
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