Question
2. Pios Restaurant currently has annual cash revenues of $240,000 and annual operating expenses of $185,000 including $35,000 in depreciation. The firms marginal tax rate
2. Pios Restaurant currently has annual cash revenues of $240,000 and annual operating expenses of $185,000 including $35,000 in depreciation. The firms marginal tax rate is 40 percent. A new cutting machine can be purchased for $120,000 that will increase revenues by $50,000 per year while operating expenses would increase by $13,000. The investment will increase depreciation by $7,000. Compute Pios annual incremental after-tax net cash
A: $25,000
B: $20,800
C: $93,000
D: $13,000
E: Cannot be determined from the information given.
3. Haydens Appliance Industries, Inc. has a project that will require and investment of $1,100,000. That project provides cash flows of $400,000, $525,000, and $600,000 in years one, two, and three respectively. If the firm has a cost of capital of 16% and uses the IRR approach to accepting or rejecting projects, what is the IRR of the project and should it be accepted?
A: 16%
B: 12%
C: 17%
D: 21%
E: None of the given answers are correct
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