A project requires an initial investment of $100,000 and isexpected to produce a cash inflow before tax of $27,200 per yearfor five years. Company A has substantial accumulated tax lossesand is unlikely to pay taxes in the foreseeable future. Company Bpays corporate taxes at a rate of 21% and can claim 100% bonusdepreciation on the investment. Suppose the opportunity cost ofcapital is 10%. Ignore inflation. a. Calculate project NPV for eachcompany. b. What is the IRR of the after-tax cash flows for eachcompany?
