Question
A second project considered by the company has a 5 year life with an initial investment of $340,000 is expected to have an after-tax cash
A second project considered by the company has a 5 year life with an initial investment of $340,000 is expected to have an after-tax cash flow of $70,000 per year for the first 2 years, $90,000 per year for the next 2 years and $150,000 for the 5th year. Assume the company has a 10% required rate of return. The company seeks to recover all of its costs on a project in 5 years or less. Calculate the following for the company: A) Payback Period B) Discounted Payback Period C) Net Present Value D) Modified Internal Rate of Return- If your calculator does not have a MIRR function key, work unitil the final ratio computation. E) Would you buy the machine? Provide a comprehensive answer addressing each evaluation method.
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