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the board of directors has asked you to assess the financial impact and make a recommendation regarding...

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Finance

theboard of directors has asked you to assess the financial impact andmake a recommendation regarding the acquistion of equipment.
After detailed analysis you conclude that:
The purchase price of the equipment is 178000 and will bedepreciated over 3 years and sold for $ 59,000. If you purchase theequipment revenues will increase by $98,000 per year and expenseswill increase by $28,000 per year. your tax rate is 40% and WACC is12%.
Accounts receivable will increase by $7000, inventoryincreases by $ 5000 and payables increase by 13,000.
what is the payback period, NPV, IRR, AND MIRR?
What do you recommend to the Board and why?
Depreciation rates: 33%, 45%, 15% and 7 %.


Answer & Explanation Solved by verified expert
3.7 Ratings (620 Votes)
NPV603214IRR1386MIRR1326Payback241The Operating cash flows areOCFMACRS 3 yearYearCash    See Answer
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Transcribed Image Text

theboard of directors has asked you to assess the financial impact andmake a recommendation regarding the acquistion of equipment.After detailed analysis you conclude that:The purchase price of the equipment is 178000 and will bedepreciated over 3 years and sold for $ 59,000. If you purchase theequipment revenues will increase by $98,000 per year and expenseswill increase by $28,000 per year. your tax rate is 40% and WACC is12%.Accounts receivable will increase by $7000, inventoryincreases by $ 5000 and payables increase by 13,000.what is the payback period, NPV, IRR, AND MIRR?What do you recommend to the Board and why?Depreciation rates: 33%, 45%, 15% and 7 %.

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