Depaul University Operations And Supply Chain Management Assignment Help - Financial Management Higgns

Question - Chapter 7
Problem 12
a).
Complete
the
spreadsheet
below by
estimating
the project's
annual after
tax cash
flow.

b). What is
the
investment's
net present
value at a
discount
rate of 10
percent?

c). What is
the
investment's
internal rate
of return?

d). How
does the
internal rate
of return
change if
the discount
rate equals
20 percent?

e). How
does the
internal rate
of return
change if
the growth
rate in EBIT
is 8 percent

instead of 3
percent?
Facts and
Assumptio
ns
Equipment
initial cost $
$350,00
0
Depreciable
life yrs. 7
Expected
life yrs. 10
Salvage
value $ $0
Straight line
dep ...Read More reciation
EBIT in year
1 28,000
Tax rate 38%
Growth rate
in EBIT 3%
Discount
rate 10%
Year 0 1 2 3 4 5 6 7 8 9 10
Initial cost 350,000
Annual
depreciation
50,00
0
50,00
0
50,00
0
50,00
0
50,00
0
50,00
0
50,00
0
EBIT
28,00
0
28,84
0
29,70
5
30,59
6
31,51
4
32,46
0
33,43
3
34,43
6
35,47
0
36,53
4 ...Read Less

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