The following is a simplified project annual income statement for Ma & Pa Incorporated for each year of an eight-year project. Its upfront cost is $2,000. Its cast of capital is 12 percent.
Sales
$925.00
less cash expenses 310.00
less depreciation 250.00
Earnings before taxes $365.00
Less taxes (at 35%) 127.75
Net income $237.25
a. Compute the project's after-tax cash flow.
b. Compute and interpret the project's NPV IRA, profitability index, and payback period.