ABC Inc. is considering a new project that will require an initial outlay of $400,000....
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Accounting
ABC Inc. is considering a new project that will require an initial outlay of $400,000. The project will generate the following annual cash flows:
•Year 1: $90,000
•Year 2: $100,000
•Year 3: $110,000
•Year 4: $120,000
•Year 5: $130,000
The project will be depreciated on a straight-line basis, and the company’s tax rate is 30%. The cost of capital is 12%.
Required:
1.Calculate the Annual Depreciation Expense.
2.Determine the Payback Period (PBP).
3.Calculate the Accounting Rate of Return (ARR).
4.Calculate the Net Present Value (NPV).
5.Calculate the Internal Rate of Return (IRR).
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