New equipment purchase, income taxes. Anna's Bakery plans to purchase a new oven for its store. The

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New equipment purchase, income taxes. Anna's Bakery plans to purchase a new oven for its store. The oven has an estimated useful life of four years. The estimated pretax cash flows for the oven are as shown in the table that follows, with no anticipated change in working capital. Anna's Bakery has a 12% after-tax required rate of return and a 40% income tax rate. Assume amortization is calculated on a straight-line basis for accounting purposes using the initial oven investment and estimated terminal disposal value of the oven. Assume all cash flows occur at year-end except for initial investment amounts. Equipment is subject to 20% CCA rate declining balance for income tax purposes.image text in transcribed

REQUIRED 1. Calculate

(a) net present value,

(b) payback period, and

(c) internal rate of return. 2. Compare and contrast the capital budgeting methods in requirement 1,LO1

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Cost Accounting A Managerial Emphasis

ISBN: 9780135004937

5th Canadian Edition

Authors: Charles T. Horngren, Foster George, Srikand M. Datar, Maureen P. Gowing

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