Answered step by step
Verified Expert Solution
Question
1 Approved Answer
please see attachment, this is urgent I need help asap Consider the following mutually exclusive pieces of equipment that perform the same task. The two
please see attachment, this is urgent I need help asap
Consider the following mutually exclusive pieces of equipment that perform the same task. The two alternatives available provide the following set of after-tax net cash flows: Year Cash Cash Flow(A) Flow(B) 0 -$20,000 -$20,000 1 13,000 6,500 2 13,000 6,500 3 13,000 6,500 4 6,500 5 6,500 6 6,500 7 6,500 8 6,500 9 6,500 Equipment A has an expected life of three years, whereas equipment B has an expected life of nine years. Assume a required rate of return of 14 percent. a. Calculate each equipment's payback period. (2 points) b. Calculate each equipment's discounted payback period. (4 points) c. Calculate each equipment's Net Present Value (NPV). (4 points) d. Calculate each equipment's internal rate of return. (4 points) e. How would you rank the investments based on the NPV criterion? (1 point) f. How would you rank the investments based on the IRR criterion? (1 point) g. The ________ assumes the reinvestment of funds at a rate equal to the equipment's IRR. (1 point) h. The _______ assumes the reinvestment of funds at the firm's cost of capital. (1 point) The General Motors Corporation is introducing a new product and which is expected to result in change in EBIT or $900,000. The firm has a 34 percent marginal tax rate. This product will also produce $200,000 of depreciation per year. In addition, this product will cause the following changes: Balance Sheet Without the With the Account product product Accounts $60,000 $70,000 receivable Inventory 55,000 65,000 Accounts 45,000 50,000 payable a. Calculate the change in net working capital? (3 points) b. Calculate the product's change in taxes. (2 points) c. What is the product's free cash flow? (5 points)Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started