(Answered) Ellas bakery plans to purchase a new oven for its store the

Engineering

Ella's Bakery plans to purchase a new oven for its store. The oven has an estimated useful life of 4 years. The estimated pretax cash flows for the oven are as shown in the table that follows, with no anticipated change in working capital. Ella's Bakery has a 14% after-tax required rate of return and a 35% income tax rate. Assume depreciation is calculated on a straight-line basis for tax purposes using the initial oven investment and estimated terminal disposal value of the oven. Assume all cash flows occur at year-end except for initial investment amounts.

1. Calculate
(a) net present value-186,000-6000=180000
(b) payback period-77000 x .14=10780x 4=$43120
(c) Internal rate of return-

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