Problem $12-50($Algo$)$ Basic Capital Budgeting Techniques; Uneven Net Cash Inflows with Taxes; Spreadsheet Application $[$LO $12-4,12-6]$

Bob Jensen Incorporated purchased a $$600,000$ machine to manufacture specialty taps for electrical equipment. Jensen expects to sell all it can manufacture in the next $10$ years. To encourage capital investments, the government has exempted taxes on profits from new investments. This legislation is to be in effect for the foreseeable future. The machine is expected to have a $10-$year useful life with no salvage value. Jensen uses straight$-$line depreciation. Jensen uses a $10\%$ discount rate in evaluating capital investments, the investment is subject to taxes, and the projected pretax operating cash inflows are as follows:

Year Pretax Cash Inflow

$1$ $ $60,000$

$274,000$

$3111,000$

$4185,000$

$5222,000$

$6278,000$

$7250,000$

$8222,000$

$9111,000$

$1074,000$

Jensen 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. The firm uses straight$-$line depreciation. Assume, for simplicity, that MACRS depreciation rules do not apply.

Required:

Using Excel, compute the following for the proposed investment:

$1.$ The payback period, under the assumption that the cash inflows occur evenly throughout the year. $($Do not round intermediate calculations. Round your final answer to $1$ decimal place.$)$

$2.$ The accounting $($book$)$ rate of return based on $($a$)$ initial investment, and $($b$)$ average investment. $($Round your final answers to $1$ decimal place $($i$.$e$.0\mathrm{.}123=12\mathrm{.}3\%).)$

$3.$ The net present value $($NPV$).($Do not round intermediate calculations. Round your final answer to nearest whole dollar amount.$)$

$4.$ The present value payback period of the proposed investment under the assumption that the cash inflows occur evenly throughout the year. $($Note: use the formula at the bottom of Appendix C$,$ Table $1$ to calculate present value factors.$)($Do not round intermediate calculations. Round your final answer to $2$ decimal places.$)$

$5.$ The internal rate of return $($IRR$).($Do not round intermediate calculations. Round your final answer to $1$ decimal place $($i$.$e$.0\mathrm{.}123=12\mathrm{.}3\%).)$

$6.$ The modified internal rate of return $($MIRR$).($Do not round intermediate calculations. Round your final answer to $1$ decimal place $($i$.$e$.0\mathrm{.}123=12\mathrm{.}3\%).)($In conjunction with this question, you might want to consult either of the following two references: MIRR Function and$/$or IRR in Excel.$)$