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    Which proposal should be accepted

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    $54,200 is required to start a project. Before investing the cash I must see if it is worth it with the following info:

    * has an expected life of five years and will generate after-tax cash flows to the company as a whole of $20,608 at the end of each year over its five-year life
    * besides the $20,608 cash flows from operations during the fifth and final year, there will be an additional cash inflow of $13,200 at the end of the fifth year associated with the salvage value of the machine, making the cash flow in year 5 equal to $33,808
    * cash flows associated with this project look like this:

    Given a require rate of return of 15%, calculate the following:
    a) Net present value (NPV).
    b) Internal rate of return (IRR)
    c) Payback period

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    Solution Summary

    The solution looks at different proposals to start a project and decides which to accept. It looks at the after-tax cash flows to the company and operations.