Question 3

A company plans to invest in a new manufacturing plant. The plant costs $800,000 and will be depreciated on a straight-line basis over 10 years. The plant will generate annual revenue of $250,000 and annual operating costs of $70,000. The tax rate is 25%. The company requires a 12% return on investment. Calculate the following:

1. Annual depreciation expense.
2. Annual operating income before tax.
3. Annual after-tax cash flows.
4. Net Present Value (NPV).
5. Internal Rate of Return (IRR).