Accrual accounting rate of return on initial investment

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Reference no: EM131551300

Garrett?, a manager of the Plate Division for the Granite City Manufacturing? company, has the opportunity to expand the division by investing in additional machinery costing $495,000. He would depreciate the equipment using the? straight-line method and expects it to have no residual value. It has a useful life of 9 years. The firm mandates a required? after-tax rate of return of 14?% on investments. Billy estimates annual net cash inflows for this investment of $130,000 before taxes and an investment in working capital of $5,000. The tax rate is 30%.

1. Calculate the net present value of this investment.

2. Calculate the accrual accounting rate of return on initial investment for this project.

Reference no: EM131551300

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