GHI Corp. has proposed a project with an initial investment of $600,000. The project will yield the following cash flows over the next 6 years:
•Year 1: $100,000
•Year 2: $120,000
•Year 3: $140,000
•Year 4: $160,000
•Year 5: $180,000
•Year 6: $200,000
The project will be depreciated on a straight-line basis with a tax rate of 20%. The cost of capital is 11%.
Required:
1.Compute the Annual Depreciation Expense.
2.Determine the Payback Period (PBP).
3.Calculate the Accounting Rate of Return (ARR).
4.Calculate the Net Present Value (NPV).
5.Calculate the Internal Rate of Return (IRR).