Dobrinski Corporation has provided the following information concerning a capital budgeting project: ...
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Accounting
Dobrinski Corporation has provided the following information concerning a capital budgeting project:
After-tax discount rate
14
%
Tax rate
30
%
Expected life of the project
4
Investment required in equipment
$
240,000
Salvage value of equipment
$
0
Working capital requirement
$
30,000
Annual sales
$
630,000
Annual cash operating expenses
$
480,000
One-time renovation expense in year 3
$
60,000
The company uses straight-line depreciation on all equipment. Assume cash flows occur at the end of the year except for the initial investments. The company takes income taxes into account in its capital budgeting.
Click here to view Exhibit 13B-1 to determine the appropriate discount factor(s) using table.
The net present value of the project is closest to:
Multiple Choice
$77,709
$210,000
$144,210
$59,949
Answer & Explanation
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