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Estimated life of proposal 2 years Initial outlay $300,000 Net...

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Finance

Estimated life of proposal 2 years
Initial outlay $300,000

Net operating cash flows per year (real, before tax)

 $220,000
Salvage value in year 2 (real, before tax) $25,000
Corporate tax rate 30%
Discount rate (nominal, after tax) 8.15% p.a
Expected inflation rate 3% p.a

What is the NPV of the above project? Please clearly explain your treatment of tax on the salvage value

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