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
