8. The company's required rate of return is 18%. 9. Income tax is ignored for the analysis. Required: 1. How should depreciation and its associated income taxes be treated in capital budgeting analysis? Explain. (4 marks) 2. Compute the net cash inflow (cash receipts less yearly cash operating expenses) anticipated from sale of the smoke detectors for each year over the next 6 years. Initial acquisition of equipment and investment in working capital should be IGNORED in this part. (6 marks) 3. Using the data computed in (2) above and other data provided in the question, determine the net present value of the proposed investment. Would you recommend that Norman Company accept the smoke detector as a new product? (14 marks) 4. Is the project's internal rate of return higher or lower than 18%? (2 marks) 5. For this part, assuming all annual cash flows happen evenly over the years (for simplicity, assuming resale of equipment and release of working capital at the end of year 6 will also be happening evenly over year 6): a. Calculate the payback period for the smoke detector project (4 marks) b. Calculate the discounted payback period for the smoke detector project (6 marks) 6. Discuss the pros and cons of using payback method. (4 marks) 8. The company's required rate of return is 18%. 9. Income tax is ignored for the analysis. Required: 1. How should depreciation and its associated income taxes be treated in capital budgeting analysis? Explain. (4 marks) 2. Compute the net cash inflow (cash receipts less yearly cash operating expenses) anticipated from sale of the smoke detectors for each year over the next 6 years. Initial acquisition of equipment and investment in working capital should be IGNORED in this part. (6 marks) 3. Using the data computed in (2) above and other data provided in the question, determine the net present value of the proposed investment. Would you recommend that Norman Company accept the smoke detector as a new product? (14 marks) 4. Is the project's internal rate of return higher or lower than 18%? (2 marks) 5. For this part, assuming all annual cash flows happen evenly over the years (for simplicity, assuming resale of equipment and release of working capital at the end of year 6 will also be happening evenly over year 6): a. Calculate the payback period for the smoke detector project (4 marks) b. Calculate the discounted payback period for the smoke detector project (6 marks) 6. Discuss the pros and cons of using payback method. (4 marks) 8. The company's required rate of return is 18%. 9. Income tax is ignored for the analysis. Required: 1. How should depreciation and its associated income taxes be treated in capital budgeting analysis? Explain. (4 marks) 2. Compute the net cash inflow (cash receipts less yearly cash operating expenses) anticipated from sale of the smoke detectors for each year over the next 6 years. Initial acquisition of equipment and investment in working capital should be IGNORED in this part. (6 marks) 3. Using the data computed in (2) above and other data provided in the question, determine the net present value of the proposed investment. Would you recommend that Norman Company accept the smoke detector as a new product? (14 marks) 4. Is the project's internal rate of return higher or lower than 18%? (2 marks) 5. For this part, assuming all annual cash flows happen evenly over the years (for simplicity, assuming resale of equipment and release of working capital at the end of year 6 will also be happening evenly over year 6): a. Calculate the payback period for the smoke detector project (4 marks) b. Calculate the discounted payback period for the smoke detector project (6 marks) 6. Discuss the pros and cons of using payback method. (4 marks) 8. The company's required rate of return is 18%. 9. Income tax is ignored for the analysis. Required: 1. How should depreciation and its associated income taxes be treated in capital budgeting analysis? Explain. (4 marks) 2. Compute the net cash inflow (cash receipts less yearly cash operating expenses) anticipated from sale of the smoke detectors for each year over the next 6 years. Initial acquisition of equipment and investment in working capital should be IGNORED in this part. (6 marks) 3. Using the data computed in (2) above and other data provided in the question, determine the net present value of the proposed investment. Would you recommend that Norman Company accept the smoke detector as a new product? (14 marks) 4. Is the project's internal rate of return higher or lower than 18%? (2 marks) 5. For this part, assuming all annual cash flows happen evenly over the years (for simplicity, assuming resale of equipment and release of working capital at the end of year 6 will also be happening evenly over year 6): a. Calculate the payback period for the smoke detector project (4 marks) b. Calculate the discounted payback period for the smoke detector project (6 marks) 6. Discuss the pros and cons of using payback method. (4 marks)