You have been given the following information on a project: It has a 3-year lifetime The initial investment in the project will be $28 million, and the investment will be depreciated straight-line, down to a salvage value of $6 million at the end of the fourth year. The revenues are expected to be $20 million next year and to grow 6% a year after that for the remaining two years. The cost of goods sold, excluding depreciation, is expected to be 53% of revenues. The tax rate is 0.36. Estimate the after-tax return on capital, by year, to find the average for the project. (Round answer to four decimal places.)
You have been given the following information on a project: It has a 3-year lifetime The initial investment in the project will be $28 million, and the investment will be depreciated straight-line, down to a salvage value of $6 million at the end of the fourth year. The revenues are expected to be $20 million next year and to grow 6% a year after that for the remaining two years. The cost of goods sold, excluding depreciation, is expected to be 53% of revenues. The tax rate is 0.36. Estimate the after-tax return on capital, by year, to find the average for the project. (Round answer to four decimal places.)
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 19EA: Redbird Company is considering a project with an initial investment of $265,000 in new equipment...
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![You have been given the following information
on a project: It has a 3-year lifetime The initial
investment in the project will be $28 million,
and the investment will be depreciated
straight-line, down to a salvage value of $6
million at the end of the fourth year. The
revenues are expected to be $20 million next
year and to grow 6% a year after that for the
remaining two years. The cost of goods sold,
excluding depreciation, is expected to be 53%
of revenues. The tax rate is 0.36. Estimate the
after-tax return on capital, by year, to find the
average for the project. (Round answer to four
decimal places.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F47a05bdd-a50c-4abf-99d7-a9401d0f2bb5%2Fa84cc665-419a-44e7-add5-6ea1d245ce64%2Fhbjljlb_processed.jpeg&w=3840&q=75)
Transcribed Image Text:You have been given the following information
on a project: It has a 3-year lifetime The initial
investment in the project will be $28 million,
and the investment will be depreciated
straight-line, down to a salvage value of $6
million at the end of the fourth year. The
revenues are expected to be $20 million next
year and to grow 6% a year after that for the
remaining two years. The cost of goods sold,
excluding depreciation, is expected to be 53%
of revenues. The tax rate is 0.36. Estimate the
after-tax return on capital, by year, to find the
average for the project. (Round answer to four
decimal places.)
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