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1. You buy a new piece of equipment for $11,778 and you receive a cash inflow of 2,000 per year for 10years. What is the internal rate of return?

2. The firm is in a 30% tax bracket and has a 14% cost of capital. Should Propulsion Labs purchase the equipment? Use the net present value method.

3. Propulsion Labs will acquire new equipment that falls under the five year MACRS category. The cost is 200,000. If the equipment is purchased, the following earnings before depreciation and taxes will be generated for the next six years.

Year 1 $75,000. Year 2 $70,000. Year 3 $55,000. Year 4 $35,000. Year 5 $55,000. Year 6 $21,000

Reference no: EM13121202

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