The South Seas Navigation Company is considering buying new sextants for its celestial navigation school. The sextants cost $34,000 and are expected to generate annual net cash flows before taxes of $7,500 per year for 9 years. The sextants will be depreciated using straight-line depreciation for 10 years; however they will be sold in 9 years for $6,000. The corporate tax rate is 34%. The required rate of return for this project is 12%. If South Seas decides to buy the new sextants, it will sell its old sextants, which have a book value of $4,000 and originally cost $10,000, for $8,000.
a. Calculate the initial investment, annual operating cash flows, and terminal value.
b. Calculate the project's NPV
c. Calculate the project's IRR.
d. Calculate the project's MIRR.