Question: PV of After-Tax Cash Flows, Payback, and ARR Suppose that Mitsubishi Chemical Corporation is planning to buy new equipment to expand its production of a popular solvent. Estimated data are as follows (monetary amounts are in thousands of Japanese yen):
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Assume a 60% fl at rate for income taxes. The company receives all revenues and pays all expenses other than depreciation in cash. Use a 14% discount rate. Assume that the company uses ordinary straight-line depreciation based on a 10-year recovery period for tax purposes. Also assume that the company depreciates the original cost less the terminal salvage value. Compute the following:
1. Depreciation expense per year
2. Anticipated net income per year
3. Annual net cash flow
4. Payback period
5. ARR on initial investment
6. NPV