Answered: Tyler, Inc., is considering switching…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 16P: Shao Airlines is considering the purchase of two alternative planes. Plane A has an expected life of...

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Tyler, Inc., is considering switching to a new production technology. The cost of the required equipment will be $3,764,394 . The discount rate is 13.01 percent. The cash flows that the firm expects the new technology to generate are as follows.

Years		CF
0		$(3,764,394)
1–2		0
3–5		$878,248
6–9		$1,534,992

Compute the payback and discounted payback periods for the project. (Round answers to 2 decimal places, e.g. 15.25.)

The payback for the project is ............

years, and the discounted payback period is...........

years.

What is the NPV for the project? Should the firm go ahead with the project? (Round answer to 2 decimal places, e.g. 15.25.)

The NPV of the project is $

, and using the NPV rule the project should be

rejected/ accepted

What is the IRR, and what would be the decision based on the IRR? (Round answer to 2 decimal places, e.g. 15.25.)

The IRR of the project is

%, and using the IRR rule the project should be...................

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