Burry Inc. has provided the following data to be used in evaluating a proposed investment project: Initial investment Annual cash receipts Life of the project $750,000 $563,000 7 years Annual cash expenses $310,000 Salvage value Tax rate $75,000 30% For tax purposes, the entire initial investment without any deduction for salvage value will be depreciated over 5 years. The company uses a discount rate of 11%. When computing the net present value of the project, what are the annual after-tax cash receipts? a) $168,900 b) $67,500 c) $338,000 d) $394,100
Burry Inc. has provided the following data to be used in evaluating a proposed investment project: Initial investment Annual cash receipts Life of the project $750,000 $563,000 7 years Annual cash expenses $310,000 Salvage value Tax rate $75,000 30% For tax purposes, the entire initial investment without any deduction for salvage value will be depreciated over 5 years. The company uses a discount rate of 11%. When computing the net present value of the project, what are the annual after-tax cash receipts? a) $168,900 b) $67,500 c) $338,000 d) $394,100
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 2CE
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