This is the information , but I cannot find annual cash savings and my professor says it is $58351 but I dont get how he got that Data: Cost of new equipment $200,000 Expected life of equipment in years 5 Disposal value in 5 years $40,000 Life production - number of cans 5,500,000 Annual production or purchase needs 1,100,000 Initial training costs 24,000 Number of workers needed 3 Annual hours to be worked per employee 2,000 Earnings per hour for employees $12 Annual health benefits per employee $2,500 Other annual benefits per employee-% of wages 18% Cost of raw materials per can $0.25 Other variable production costs per can $0.05 Costs to purchase cans - per can $0.45 Required rate of return 12% Tax rate 35% Make Purchase Cost to produce Annual cost of direct material: Need of 1,100,000 cans per year $275,000 Annual cost of direct labor for new employees: Wages 72,000 Health benefits 7,500 Other benefits 3,600 Total wages and benefits 83,100 Other variable production costs 55,000 Total annual production costs $496,200 Annual cost to purchase cans $495,000 Part 1 Cash flows over the life of the project Before Tax After Tax Item Amount Amount Annual cash savings Tax savings due to depreciation Total annual cash flow Part 2 Payback Period Part 3 Annual rate of return Accounting income as result of decreased costs Annual cash savings Less Depreciation Before tax income Tax at 35% rate After tax income Part 4 Net Present Value Before Tax After tax 12% PV Present Item Year Amount Tax % Amount Factor Value Cost of machine 0 $200,000 35% $270,000 Cost of training 0 83,100 35% 112,185 Annual cash savings 1-5 35% Tax savings due to depreciation 1-5 14,000 35% Disposal value 5 40,000 35% Net Present Value Part 5 Internal Rate of Return Before Tax After tax 18% PV Present Item Year Amount Tax % Amount Factor Value Cost of machine 0 Cost of training 0 Annual cash savings 1-5 Tax savings due to depreciation 1-5 Disposal value 5 Net Present Value Before Tax After tax Present Item Year Amount Tax % Amount Factor Value Cost of machine 0 Cost of training 0 Annual cash savings 1-5 Tax savings due to depreciation 1-5 Disposal value 5 Net Present Value Before Tax After tax Present Item Year Amount Tax % Amount Factor Value Cost of machine Cost of training Annual cash savings Tax savings due to depreciation Disposal value Net Present Value Excel Function method to calculate IRR After Tax Item Year Amount Cost of machine and training 0 Year 1 inflow 1 Year 2 inflow 2 Year 3 inflow 3 Year 4 inflow 4 Year 5 inflow 5 The IRR function will require the range of cash flows beginning with the initial cash outflow for the investment and progressing through each year of the project. You also have to include an initial "guess" for the possible IRR. The formula is: =IRR(values,guess) IRR Function