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Your company has an opportunity to invest in a project that is expected to result in...

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Finance

Your company has an opportunity to invest in a project that isexpected to result in after-tax cash flows of $16,000 the firstyear, $18,000 the second year, $21,000 the third year, $24,000 thefourth year, $28,000 the fifth year, and $34,000 the sixth year.The project would cost the firm $72,000. If the firm's cost ofcapital is 12%, what is the modified internal rate of return?

18.17%

20.10%

15.71%

13.51%

16.66%

You are evaluating a potential investment in equipment. Theequipment's basic price is $163,000, and shipping costs will be$4,900. It will cost another $21,200 to modify it for special useby your firm, and an additional $8,200 to install it. The equipmentfalls in the MACRS 3-year class that allows depreciation of 33% thefirst year, 45% the second year, 15% the third year, and 7% thefourth year. You expect to sell the equipment for 29,600 at the endof three years. The equipment is expected to generate revenues of$151,000 per year with annual operating costs of $77,000. Thefirm's marginal tax rate is 40.0%. What is the after-tax operatingcash flow for year 2?

$79,914

-$8,871

$74,000

-$14,785

$88,785

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