Basic Capital-Budgeting Techniques; Uneven Net Cash Inflows with Taxes; Spreadsheet Applic...

Basic Capital-Budgeting Techniques; Uneven Net Cash Inflows with Taxes; Spreadsheet Application

Use the same information for this problem as you did for Problem 12-47, except that the discount rate is 10% (not 12%); the investment is subject to taxes; and the projected pretax operating cash inflows are as follows:

Jensen has been paying 25% 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 the following for the proposed investment:

1. The payback period, under the assumption that the cash inflows occur evenly throughout the year.

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2. The accounting (book) rate of return based on: (a) initial investment, and (b) average investment.

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3. The net present value (NPV).

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4. The present value payback period of the proposed investment under the assumption that the cash inflows occur evenly throughout the year.

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5. The internal rate of return (IRR).

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6. The modified internal rate of return (MIRR).