Question
In reviewing current operating processes, the company accountant has provided you with the following information (below and Table 1) about a small chemical process that
In reviewing current operating processes, the company accountant has provided you with the following information (below and Table 1) about a small chemical process that was built ten years ago.
Capital investment = $30 x 106 ($10 x 106 at end of year 1, $15 x 106 at end of year 2, and $5 x 106 at end of year 3)
Working capital = $10 x 106
Table 1. Cash Flow Information
Year after Start-up | Yearly After-tax Cash Flow ($106/yr) |
1 | 7.015 |
2 | 6.206 |
3 | 6.295 |
4 | 6.852 |
5 | 6.859 |
6 | 7.218 |
7 | 5.954 |
8 | 5.459 |
9 | 5.789 |
10 | 5.898 |
Provide a summary table of values, and the cumulative cash flow diagrams for the non-discounted and discounted cases.
Calculate the following:
Non-discounted payback period (PBP)
Rate of return on investment (ROROI)
Discounted payback period (DPBP) – use a discount rate of 7%
Net present value (NPV) – use a discount rate of 7%
Discounted cash flow rate of return (DCFROR)
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