Payback Period and NPV Taxes and Straight Line Depreciation Assume that United Technologies Corporation is evaluating a proposal to change the companys manual design system to a computer aided design (CAD) system The proposed system is expected to save 12,000 design hours per year an operating cost savings of $65 per hour The annual cash expenditures of operating the CAD system are estimated to be $600,000 The CAD system requires an initial investment of $200,000 The estimated life of this system is five years with no salvage value The tax rate is 21 , and United Technologies uses straight line depreciation for tax purposes United Technologies has a cost of capital of 14 (a) Compute the annual after tax cash flows related to the CAD project (b) Compute each of the following for the project 1 Payback period Round your answer to 2 decimal places 2 Net present value (Round answer to the nearest whole number ) Payback Period and NPV Taxes and Straight Line Depreciation Assume that United Technologies Corporation is evaluating a proposal to change the company's manual design system to a computer aided design (CAD) system The proposed system is expected to save 12,000 design hours per year an operating cost savings of $65 per hour The annual cash expenditures of operating the CAD system are estimated to be $600,000 The CAD system requires an initial investment of $200,000 The estimated life of this system is five years with no salvage value The tax rate is 21 , and United Technologies uses straight line depreciation for tax purposes United Technologies has a cost of capital of 14 (a) Compute the annual after tax cash flows related to the CAD project $ (b) Compute each of the following for the project 1 Payback period Round your answer to 2 decimal places years 2 Net present value (Round answer to the nearest whole number ) $

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Payback Period and NPV: Taxes and Straight-Line Depreciation Assume that United Technologies Corporation is evaluating a proposal to change the companys manual design system to

Payback Period and NPV: Taxes and Straight-Line Depreciation

Assume that United Technologies Corporation is evaluating a proposal to change the companys manual design system to a computer-aided design (CAD) system. The proposed system is expected to save 12,000 design hours per year; an operating cost savings of $65 per hour. The annual cash expenditures of operating the CAD system are estimated to be $600,000. The CAD system requires an initial investment of $200,000. The estimated life of this system is five years with no salvage value. The tax rate is 21%, and United Technologies uses straight-line depreciation for tax purposes. United Technologies has a cost of capital of 14%.

(a) Compute the annual after-tax cash flows related to the CAD project.

(b) Compute each of the following for the project:

1. Payback period. Round your answer to 2 decimal places.

2. Net present value. (Round answer to the nearest whole number.)

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Payback Period and NPV: Taxes and Straight-Line Depreciation Assume that United Technologies Corporation is evaluating a proposal to change the company's manual design system to a computer-aided design (CAD) system. The proposed system is expected to save 12,000 design hours per year; an operating cost savings of $65 per hour. The annual cash expenditures of operating the CAD system are estimated to be $600,000. The CAD system requires an initial investment of $200,000. The estimated life of this system is five years with no salvage value. The tax rate is 21%, and United Technologies uses straight-line depreciation for tax purposes. United Technologies has a cost of capital of 14%. (a) Compute the annual after-tax cash flows related to the CAD project. $ (b) Compute each of the following for the project: 1. Payback period. Round your answer to 2 decimal places. years 2. Net present value. (Round answer to the nearest whole number.) $