Reference no: EM132548827
Answer the following questions using the information below:
Gavin Inc. is in need of a computer network for their staff. They receive a proposal as below :
Proposal Initial after-tax investment in equipment$102,000
Annual cash increase in operations:
Year 1 (before-tax) 60,000
Year 2 (before-tax) 60,000
Year 3 (before-tax) 60,000
Terminal disposal value 0
Estimated life 3 years
The company uses straight-line depreciation for all capital assets. Required rate of return= 14%; tax rate = 30%.
Question 1: What are Annual Cash Flows from Operations and Net Present Value (NPV)?