Barry Corporation has the following information pertaining to the purchase of a new piece of equipment:

Cash revenues $330,000 per year

Cash expenses $200,000 per year

Cost of equipment $420,000

Salvage value at the end of the 6th year $60,000

Increase in working capital requirements $100,000

Tax rate 40 percent

Life 6 years

Cost of capital is 10 percent.

Required:

a. Calculate the following assuming straight-line depreciation:

i. Calculate the after-tax net income for each of the six years.

ii. Calculate the after-tax cash flows for each of the six years.

iii. Calculate the payback period.

iv. Calculate the accrual accounting rate of return for each of the six years.

v. Calculate the net present value (NPV).

vi. Calculate the internal rate of return (IRR).

b. Calculate the following assuming double-declining balance depreciation:

i. Calculate the after-tax net income for each of the six years.

ii. Calculate the after-tax cash flows for each of the six years.

iii. Calculate the payback period.

iv. Calculate the accrual accounting rate of return for each of the six years.

v. Calculate the net present value (NPV).

vi. Calculate the internal rate of return (IRR).