Basic Capital-Budgeting Techniques, Uneven Net Cash Inflows With Taxes, Spreadsheet Application Use the same information for this problem as you did for Exercise 12-41, except that the investment is subject to taxes and that the pre-tax operating cash inflows are as follows:
Year | Pre-tax Cash Inflow | Year | Pre-tax Cash Inflow |
1 | $50,000 | 6 | $300,000 |
2 | 80,000 | 7 | 270,000 |
3 | 120,000 | 8 | 240,000 |
4 | 200,000 | 9 | 120,000 |
5 | 240,000 | 10 | 40,000 |
Irv Nelson has been paying 30 percent for combined federal, state, and local income taxes, a rate that is not expected to change during the period of this investment. The firm uses straight-line depreciation. Assume, for simplicity, that MACRS depreciation rules do not apply.
Required Using Excel, compute for the proposed investment the:
1. Payback period for the proposed investment under the assumption that the cash inflows occur evenly throughout the year.
2. Book rate of return based on (a) initial investment and (b) average investment.
3. Net present value (NPV).
4. Present value payback period of the proposed investment under the assumption that the cash inflows occur evenly throughout the year.
5. Internal rate of return (IRR).
6. Modified internal rate of return (MIRR).
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