Your company is evaluating new equipment that will cost $2,000,000. The equipment is in the MACRS 3-year class and will be sold after 3 years for $150,000. Use of the equipment will increase net working capital by 200,000. The equipment will save $900,000 in operating costs each year for 3 years. The company's tax rate is 35 percent and its cost of capital is 12%.
'Part a. Calculate the cash flow in Year 0.
Part b. Calculate the incremental operational cash flows .
Reference: MACRS Depreciation Percentages for three-year class life assets: 0.3333 0.4445 0.1481 0.0741
Paty c. Calculate the non-operating terminal year cash flow.
Part d. Calculate the project's payback period.
Part e. Calculate the project's NPV.
Part f. Calculate the project's IRR.
Part g. Calculate the project's MIRR.
Part h. Investment Decision: Should the project be accepted or rejected? Why or why not?