Fazio Pump Corporation

This case involves setting up cash flows for determining the net present value, IRR and payback period of an investment project. There is an inflation assumption for the cash flows, which introduces the issue of whether it is consistent with the inflation premium embraced in the required rate of return. Modified accelerated cost recovery (MACRS) is used for depreciation, and this affects the timing of after-tax cash inflows. The case is a beginning capital budgeting one.