YEARLY SAVINGS BEFORE DEPRECIATION AND TAXES

INVEST- END OF YEAR

PROJECT MENT 1 2 3 4 5 6 7

A $28,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000 $8,000

B 20,000 5,000 5,000 6,000 6,000 7,000 7,000 7,000

MACRS Percentages 20.00% 32.00% 19.20% 11.52% 11.52% 5.76%

Required rate of return: 14%

Tax rate 34%

CASH FLOWS:
END OF YEAR
1 2 3 4 5 6 7
Project A

Savings
Depreciation
Profit before Taxes

Taxes

Cash flow (Savings

less taxes)

Project B

Savings
Depreciation
Profit before Taxes

Taxes

Cash flow (Savings

less taxes)
a.
PAY BACK PERIOD (PBP):

PROJECT A:

CASH CUMULATIVE
YEAR FLOWS INFLOWS

0
1
2
3
4
5
6
7

Pay back period (in years):

PROJECT B:

CASH CUMULATIVE
YEAR FLOWS INFLOWS

0
1
2
3
4
5
6
7

Pay back period (in years):

b.
Net Present Value:

PROJECT A:

PROJECT B:

c.
PROFITABILITY INDEX:

PROJECT A:

PROJECT B:

d.
INTERNAL RATE OF RETURN:

PROJECT A:

PROJECT B: