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Capital Budgeting

Harris Corporation provides the following data on a proposed capital project:

Initial investment $200,000
Expected useful life 4 years
Increase in annual net cash inflow (before taxes) $66,000
Required rate of return 12%
Income tax rate 25%

Harris uses straight-line depreciation method with no salvage value.

Required: compute for this project:
a. NPV.
b. IRR (to the nearest tenth of a percent)
c. Payback period.
d. Book rate of return on the net initial investment.

**Use Excel Spreadsheet**


Solution Summary

The solution explains the calculation of NPV, IRR, payback period and the book rate of return.