(Solution) - Forester Fashions is considering the purchase of computerized cl -(2025 Original AI-Free Solution)

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Forester Fashions is considering the purchase of computerized clothes-designing software. The software is expected to cost $320,000, have a useful life of 5 years, and have no salvage value at the end of its useful life. Assume that tax regulations permit the following depreciation patterns for this software:
Year Percent Deductible
1 ......... 20
2 ......... 32
3 ......... 19
4 ......... 15
5 ......... 14
The company?s tax rate is 35 percent, and its cost of capital is 8 percent. The software is expected to generate the following cash savings and cash expenses:

a. Prepare a time line presenting the after-tax operating cash flows.
b. Determine the following on an after-tax basis: payback period, net present value, profitability index, and internal rate ofreturn.