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Category > Economics Posted 12 Jul 2017 My Price 7.00

Lucky Lion Corporation

Lucky Lion Corporation is considering the purchase of a football-making machine for which the initial cash outlay will be $95,000. Predicted net cash inflows before depreciation and taxes are $22,000 per year for the next five years. The machine will be depreciated (using the straight-line method) over the 5-year period with a zero estimated salvage value at the end of the period. The corporation's marginal tax rate is 38 percent and its cost of capital is 12 percent.

 

(a)

Determine the annual net cash flow after depreciation and taxes for years 1-5.

(b)

Determine the internal rate of return.

(c)

Determine the net present value.

(d)

Should Lucky Lion Corporation purchase the machine? Why or why not?

Answers

SuperTutor
(15)
Status NEW Posted 12 Jul 2017 04:07 AM My Price 7.00

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file 1499835002-Solutions file.docx preview (51 words )
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