Pertaining to the purchase of a new piece of equipment

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Reference no: EM13789449

Acme Company has the following information pertaining to the purchase of a new piece of equipment.

Cash Revenues $500,000 per year

Cash Expenses $300,000 per year

Cost of Equipment $850,000

Salvage value at the end of the 7th Year $70,000

Tax Rate 8 years

Depreciation Straight line method

Cost of Capital 10%

1) Calculate the after-tax cash flows for the first year.

2) Calculate NPV

3) Calculate Payback period

4) Calculate ARR on average investment for year 1

5) Calculate IRR

Reference no: EM13789449

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