DEF Inc. plans to invest in a machinery costing $250,000. The machinery is expected to...
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DEF Inc. plans to invest in a machinery costing $250,000. The machinery is expected to yield the following cash flows over its useful life of 6 years:
Year | Cash Flow |
1 | $70,000 |
2 | $60,000 |
3 | $50,000 |
4 | $40,000 |
5 | $30,000 |
6 | $20,000 |
The machine has no salvage value, and the company uses straight-line depreciation. The corporate tax rate is 28%. Required:
a. Calculate the Payback Period and ARR
b. Calculate NPV and PI, assuming a 10% discount rate
c. Compute the IRR
d. Determine the impact on NPV if the discount rate increases by 2%
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