Unformatted text preview: return (hurdle rate) has been determined to be 12% for all new projects, and the current tax rate of 35% is anticipated to remain unchanged. The pricing for a gallon of paint, as well as the number of units sold, will not be affected by this decision. The unit-of-production depreciation method would be used if the new equipment is purchased. Required: 1. Based on the above information and using Excel, calculate the following items for this proposed equipment purchase: o Annual cash flows over the expected life of the equipment o Payback period o Annual rate of return o Net present value o Internal rate of return 2. Would you recommend the acceptance of this proposal? Why or why not? Prepare a short double-spaced Word paper elaborating and supporting your answer. Note: A sample problem can be found in Doc Sharing (Word document instructions and Excel document solution)....
View Full Document
- Spring '10
- Net Present Value, Production Department, Internal rate of return, total production costs, current tax rate