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YOU ARE EVALUATING THE PURCHASE OF EQUIPMENT Data You want to earn a minimum of 12.00% Cost of equipment $ 345,000 Trade in value of

YOU ARE EVALUATING THE PURCHASE OF EQUIPMENT
Data
You want to earn a minimum of 12.00%
Cost of equipment $ 345,000
Trade in value of the equipment $ -
How many years to earn revenue from the equipment 8 Years
Projected Annual Income Statement:
Sales $ 245,000 This Income Statement shows what is expected to if the new equipment is purchased
Less:
Manufacturing costs $ 140,000
Depreciation 43,125
Shipping and administrative costs 22,000 205,125
Income before income taxes 39,875
Income tax expense 10,800
Net income $ 29,075
Required
(a) Net annual cash flow ( 2points) $72,200 Remember, net cash flow and net income are not the same thing.
Payback period (2 points) 4.778 years
(b) 10 Points Time Period Cash Flows Discount Factor FROM TABLES APPENDIX G Present Value
Net annual cash flow 1-8
Purchase price of equipment 0 This should be a negative value
NPV- USING tables>>>>>
(c) 10 Points Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
Net Annual Cash Flow
Equipment purchase price
TOTAL
NPV $ - Using NPV function in Excel
(d) IRR (3 Points) #NUM! This should be in % format and should be somewhere around the rate given in the data section. If it's not, then you've done something wrong!

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