**********Need answers for excel workbook below*************

Harper Electronics is considering investing in manufacturing equipment expected to cost $250,000. The equipment has an estimated useful life of four years and a salvage value of $25,000. It is expected to produce incremental cash revenues of $125,000 per year. Harper has an effective income tax rate of 30 percent and a desired rate of return of 10 percent. (PV of $1 and PVA of S1) (Use appropriate factor(s) from the tables provided.) Required a. Determine the net present value and the present value index of the investment, assuming that Harper uses straight-line depreciation for financial and income tax reporting. b. Determine the net present value and the present value index of the investment, assuming that Harper uses double-declining-balance depreciation for financial and income tax reporting. d. Determine the payback period and unadjusted rate of return (use average investment), assuming that Harper uses straight-line depreciation. e. Determine the payback period and unadjusted rate of return (use average investment), assuming that Harper uses double-declining-balance depreciation. (Note: Use average annual cash flow when computing the payback period and average annual income when determining the unadjusted rate of return.) 49 50 Net Present Value Table Value Present Value 51 Present Value of Cash Inflows 52 Year 1 53 Year 2 54 Year 3 55 Year 4 56 Salvage Value 57 Present Value of Cash Outflows 58 Net Present Value 59 60 Present Value Index Computation: 61 Present Value of Cash Inflows 62 Present value of cash inflows 63 Present value of salvage value 64 Total present value of cash inflows 65 66 Present Value of Cash Outflows 67 Year 1 income tax payment 68 Year 2 income tax payment 69 Year 3 income tax payment 70 Year 4 income tax payment 71 Initial investment 72 Total present value of cash outflows 73 74 Present Value Index 75 76 d. Payback and Unadjusted Rate of Return Using Straight-Line Depreciation 77 Payback (in years) 78 Unadjusted Rate of Return 79 Alternative giving consideration to Salvage Value: 80 Unadjusted Rate of Return 81 82 e. Payback and Unadjusted Rate of Return Using Double-Declining Balance Depreciation 83 Payback (in years) 84 Unadjusted Rate of Return 85 Alternative giving consideration to Salvage Value: 86 Unadjusted Rate of Return 87 Harper Electronics is considering investing in manufacturing equipment expected to cost $250,000. The equipment has an estimated useful life of four years and a salvage value of $25,000. It is expected to produce incremental cash revenues of $125,000 per year. Harper has an effective income tax rate of 30 percent and a desired rate of return of 10 percent. (PV of $1 and PVA of S1) (Use appropriate factor(s) from the tables provided.) Required a. Determine the net present value and the present value index of the investment, assuming that Harper uses straight-line depreciation for financial and income tax reporting. b. Determine the net present value and the present value index of the investment, assuming that Harper uses double-declining-balance depreciation for financial and income tax reporting. d. Determine the payback period and unadjusted rate of return (use average investment), assuming that Harper uses straight-line depreciation. e. Determine the payback period and unadjusted rate of return (use average investment), assuming that Harper uses double-declining-balance depreciation. (Note: Use average annual cash flow when computing the payback period and average annual income when determining the unadjusted rate of return.) 49 50 Net Present Value Table Value Present Value 51 Present Value of Cash Inflows 52 Year 1 53 Year 2 54 Year 3 55 Year 4 56 Salvage Value 57 Present Value of Cash Outflows 58 Net Present Value 59 60 Present Value Index Computation: 61 Present Value of Cash Inflows 62 Present value of cash inflows 63 Present value of salvage value 64 Total present value of cash inflows 65 66 Present Value of Cash Outflows 67 Year 1 income tax payment 68 Year 2 income tax payment 69 Year 3 income tax payment 70 Year 4 income tax payment 71 Initial investment 72 Total present value of cash outflows 73 74 Present Value Index 75 76 d. Payback and Unadjusted Rate of Return Using Straight-Line Depreciation 77 Payback (in years) 78 Unadjusted Rate of Return 79 Alternative giving consideration to Salvage Value: 80 Unadjusted Rate of Return 81 82 e. Payback and Unadjusted Rate of Return Using Double-Declining Balance Depreciation 83 Payback (in years) 84 Unadjusted Rate of Return 85 Alternative giving consideration to Salvage Value: 86 Unadjusted Rate of Return 87