Capital Budgeting Project:

The management of Devine Instrument Company is considering the purchase of a new drilling machine,

model RoboDril $1010$K$,$ for an independent ten$-$year project.

The machine$$s cost is $$650,000$ with no salvage value at the end of ten years. The company has been

paying $25\%$ for combined federal, state, and local income taxes, a rate that is not expected to change

during the period of this investment. Devine Instrument uses straight$-$line depreciation and a $10\%$

discount rate in evaluating capital investments. The projected pretax operating cash inflows are as

follows:

Year Pretax Cash Inflow Year Pretax Cash Inflow

$1$ $ $65,0006$ $$300,000$

$280,0007270,000$

$3120,0008240,000$

$4200,0009120,000$

$5240,0001080,000$

Required Using Excel, compute the following for the proposed investment:

$1.$ Determine the after$-$tax cash inflow each year of project operation $($i$.$e$.,$ at the end of each of years $1$

through $10).(40$ points$)$

$2.$ The payback period $($in years$),$ under the assumption that the cash inflows occur evenly throughout

the year. Round your answer to $1$ decimal place. $(10$ points$)$

$3.$ The accounting $($book$)$ rate of return based on $($a$)$ initial investment, and $($b$)$ average investment.

Round both answers to $1$ decimal place. $(10$ points$)$

$4.$ The net present value $($NPV$),$ rounded to the nearest whole dollar. $(10$ points$)$

$5.$ The present value payback period of the proposed investment under the assumption that the cash

inflows occur evenly throughout the year. $(10$ points$)$

$6.$ The internal rate of return $($IRR$),$ rounded to $1$ decimal place. $(10$ points$)$

$7.$ The modified internal rate of return $($MIRR$),$ rounded to $1$ decimal place. $(10$ point