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What is discounted payback based upon initial cash outflows

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The Bird Co. is considering a 7-year project that would require a cash outlay of $160,000 for machinery and an additional $25,000 for working capital that would be released at the end of the project. The equipment would be depreciated evenly over the 7 years and have a salvage value of $10,000 at the end of 7 years. The project would generate before tax annual cash inflows of $50,000. The tax rate is 21% and the company's discount rate is 14%.

Question 1: What is the annual accounting income?

Question 2: What is the annual after-tax cash flow?

Question 3: What is the payback based upon the initial cash outflows?

Question 4: What is the discounted payback based upon the initial cash outflows?

Question 5: What is the net present value?

Question 6: What is the internal rate of return?

Question 7: Would you recommend this project or not? Why?

Reference no: EM132898770

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