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Tall Oaks Corp. is considering a new machine that requires an initial investment of $480,000 installed,...

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Finance

Tall Oaks Corp. is considering a new machine that requires aninitial investment of $480,000 installed, and has a useful life of8 years. The expected annual after-tax cash flows for the machineare $89,000 for each of the 8 years and nothing thereafter. a.Calculate the net present value of the machine if the required rateof return is 11 percent. b. Calculate the IRR of this project. c.Should Tall Oaks accept the project (assume that it is independentand not subject to any capital rationing constraint)? In your ownwords, explain your answer

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4.2 Ratings (502 Votes)
a Net Present value 2199507 Working Year Cash flow Discount factor Present value a b c111a dbc 0 480000 10000 48000000 1 89000 09009 8018018 2 89000 08116 7223440 3 89000 07312 6507603 4    See Answer
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Transcribed Image Text

Tall Oaks Corp. is considering a new machine that requires aninitial investment of $480,000 installed, and has a useful life of8 years. The expected annual after-tax cash flows for the machineare $89,000 for each of the 8 years and nothing thereafter. a.Calculate the net present value of the machine if the required rateof return is 11 percent. b. Calculate the IRR of this project. c.Should Tall Oaks accept the project (assume that it is independentand not subject to any capital rationing constraint)? In your ownwords, explain your answer

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