What annual cash flows the new equipment will generate

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Reference no: EM132022297

The XYZ Company is considering buying a modern equipment for $220,000. The new equipment will be depreciated (as per the following schedule. Year 1: 15%, Year 2: 30%, Year 3: 25%, Year 4: 20%, Year 5: 10%) to a salvage value of $0 in five years. The new equipment will increase annual revenues by $142,000 and annual-operating expenses by $81,000. The net working capital will increase by $40,000 at a time period 0 but will be available at the end of the project. The company's marginal tax rate is 34%. What annual cash flows the new equipment will generate? What is the payback, discounted payback, IRR and NPV if required rate is 13%?

Reference no: EM132022297

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