Acme Company has the following information pertaining to the purchase of a new piece of equipment.
Cash Revenues $500,000 per year
Cash Expenses $300,000 per year
Cost of Equipment $850,000
Salvage value at the end of the 7th Year $70,000
Tax Rate 8 years
Depreciation Straight line method
Cost of Capital 10%
1) Calculate the after-tax cash flows for the first year.
2) Calculate NPV
3) Calculate Payback period
4) Calculate ARR on average investment for year 1
5) Calculate IRR