P LOLOAftertax cash flows; payback; NPV; PI; IRR Forester Fashions is
considering the purchase of computerized design software. The software is expected to cost
$ have a useful life of five years, and have no salvage value at the end of its useful life.
Assume that tax regulations permit the following depreciation pattern for this software:
The company's tax rate is percent, and its cost of capital is percent. The software is expected
to generate the following cash savings and cash expenses:
a Prepare a time line presenting the aftertax operating cash flows.
b Determine the following on an aftertax basis: payback period, net present value,
profitability index, and internal rate of return. Round time and PI to one decimal point.
