Question
A potential investment has a cost of $542,500 and auseful life of 7 years. Annual cash salesfrom the investment are expected to be$219,202 and annual
A potential investment has a cost of $542,500 and auseful life of 7 years. Annual cash salesfrom the investment are expected to be$219,202 and annual cash operating expenses are expected to be $86,352. The expected salvage value at the end of the investment's life is $65,000.The company uses straight-line depreciation for all assets based on the full cost of the assets.
The company has a before-tax discount rate of18%, an after-tax discount rate of15%, and a tax rate of35%.
1. Assume the company wants to consider this investment before-tax.(Round dollar amounts to the nearest whole dollar and IRR to one decimal place (i.e. .055 = 5.5%). Enter negative amounts with a minus sign.)
Calculate the before-tax annual PMT of the investment
calculate the before-tax FV of the investment
calculate the before-tax NPV of the investment
calculate the before-tax IRR of the investment
2. Assume the company wants to consider this investment after-tax.(Round dollar amounts to the nearest whole dollar and IRR to one decimal place (i.e. .055 = 5.5%). Enter negative amounts with a minus sign.)
Calculate the before-tax annual PMT of the investment
calculate the before-tax FV of the investment
calculate the before-tax NPV of the investment
calculate the before-tax IRR of the investment
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