Jason Corporation is considering including two pieces of equipment, a truck and an overhead pulley system, in this year’s capital budget. The projects are independent. The cash outlay for the truck is Rs 17.1 million, and that for the pulley system is Rs 22.43 million. The firm’s cost of capital is 15 percent. After-tax cash flows, including depreciation, are as follows: YearTruckPulley 1Rs in million5.1Rs in million$6.525.57.035.07.546.08.057.08.5Required:Calculate for each:a) Internal Rate of Return,b) Net Present Value,c) Modified Internal Rate of Return, reinvestment rate is 10%d) Payback Period,e) Discounted Payback Periodf) Indicate the correct accept/reject decision for each project.

IRR is the rate at which NPV of the project is zero. Using excel IRR and MIRR function to calculate…

Answered: ason Corporation is considering…

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 8P: Edelman Engineering is considering including two pieces of equipment, a truck and an overhead pulley...

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Jason Corporation is considering including two pieces of equipment, a truck and an overhead pulley system, in this year’s capital budget. The projects are independent. The cash outlay for the truck is Rs 17.1 million, and that for the pulley system is Rs 22.43 million. The firm’s cost of capital is 15 percent. After-tax cash flows, including depreciation, are as follows:

Year	Truck	Pulley
1	Rs in million 5.1	Rs in million $6.5
2	5.5	7.0
3	5.0	7.5
4	6.0	8.0
5	7.0	8.5

Required:

Calculate for each:

a) Internal Rate of Return,
b) Net Present Value,
c) Modified Internal Rate of Return, reinvestment rate is 10%
d) Payback Period,
e) Discounted Payback Period
f) Indicate the correct accept/reject decision for each project.

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