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Financial Accounting: Brandon Smith Enterprises has provided the following data to be used in evaluating a proposed investment project: Initial investment $800,000 Annual cash receipts $600,000 Life of the project 6 years Annual cash expenses $350,000 Salvage value Tax rate $85,000 25% For tax purposes, the entire initial investment without any deduction for salvage value will be depreciated over 4 years. The company uses a discount rate of 10%. When computing the net present value of the project, what are the annual after-tax cash receipts? a) $450,000 b) $120,000 c) $420,000 d) $348,000

Financial Accounting: Brandon Smith Enterprises has provided the following data to be used in evaluating a proposed investment project: Initial investment $800,000 Annual cash receipts $600,000 Life of the project 6 years Annual cash expenses $350,000 Salvage value Tax rate $85,000 25% For tax purposes, the entire initial investment without any deduction for salvage value will be depreciated over 4 years. The company uses a discount rate of 10%. When computing the net present value of the project, what are the annual after-tax cash receipts? a) $450,000 b) $120,000 c) $420,000 d) $348,000

EBK CONTEMPORARY FINANCIAL MANAGEMENT
EBK CONTEMPORARY FINANCIAL MANAGEMENT
14th Edition
ISBN:9781337514835
Author:MOYER
Publisher:MOYER
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
Problem 8P
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Financial Accounting: Brandon Smith Enterprises has provided the following data to be used in evaluating a proposed investment project: Initial investment $800,000 Annual cash receipts $600,000 Life of the project 6 years Annual cash expenses $350,000 Salvage value Tax rate $85,000 25% For tax purposes, the entire initial investment without any deduction for salvage value will be depreciated over 4 years. The company uses a discount rate of 10%. When computing the net present value of the project, what are the annual after-tax cash receipts? a) $450,000 b) $120,000 c) $420,000 d) $348,000
Transcribed Image Text:Financial Accounting: Brandon Smith Enterprises has provided the following data to be used in evaluating a proposed investment project: Initial investment $800,000 Annual cash receipts $600,000 Life of the project 6 years Annual cash expenses $350,000 Salvage value Tax rate $85,000 25% For tax purposes, the entire initial investment without any deduction for salvage value will be depreciated over 4 years. The company uses a discount rate of 10%. When computing the net present value of the project, what are the annual after-tax cash receipts? a) $450,000 b) $120,000 c) $420,000 d) $348,000
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